**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 September 30, 2005
  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 an accelerated filer (as defined
        in Rule
        12-b2 of the Exchange Act).
  Yes
                  þ
              
              No
                  o
  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
        November 7, 2005, there were 106,556,451 common shares of Apollo Gold
        Corporation outstanding.
  
 
  **TABLE
        OF CONTENTS**
 
 **Page**PART
                    I
                FINANCIAL
                    INFORMATION
                3ITEM
                    1.
                FINANCIAL
                    STATEMENTS
                3Consolidated
                    Balance Sheets - As of September 30, 2005 and as of December
                    31,
                    2004
                4Consolidated
                    Statements of Operations for the Three and Nine Months Ended
                    September 30,
                    2005 and 2004
                5Consolidated
                    Statements of Shareholders’ Equity for the Year Ended December 31, 2004
                    and the Nine Month Period ended September 30, 2005
                6Consolidated
                    Statements of Cash Flows for the Three and Nine Months Ended
                    September 30,
                    2005 and 2004
                7Notes
                    to Financial Statements
                8ITEM
                    2.
                MANAGEMENT’S
                    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                    OPERATIONS
                25ITEM
                    3.
                QUANTITATIVE
                    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
                37ITEM
                    4.
                CONTROLS
                    AND PROCEDURES
                37PART
                    II
                OTHER
                    INFORMATION
                39ITEM
                    1.
                LEGAL
                    PROCEEDINGS
                39ITEM
                    2.
                UNREGISTERED
                    SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS
                39ITEM
                    3.
                DEFAULTS
                    UPON SENIOR SECURITIES
                39ITEM
                    4.
                SUBMISSION
                    OF MATTERS TO A VOTE OF SECURITY HOLDERS
                39ITEM
                    5.
                OTHER
                    INFORMATION
                39ITEM
                    6.
                EXHIBITS
                39INDEX
                    TO EXHIBITS
                
                40Certification
                    of CEO Pursuant to Section 302
                2Certification
                    of CFO Pursuant to Section 302
                4Certification
                    of CEO and CFO Pursuant to Section 906
                6
  **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. Words such as “expects,”
        anticipates,” “intends,” believes” and similar expressions identify forward
        looking statements. These statements include comments regarding:
  1
  ·
              closing
                  of and the closing date for thesale of our Nevada
                  Assets;·
              production
                  and production costs;·
              cash
                  operating costs;·
              total
                  cash costs;·
              grade;·
              remediation
                  efforts;·
              exploration;·
              development
                  and
                  drilling program;·
              life
                  of mine estimates;·
              cash
                  flows;·
              future
                  financing;·
              use
                  of funds;·
              the
                  ability to substitute collateral for the convertible
                  debentures;·
              expenditures;·
              estimates
                  of environmental liabilities;·
              cash
                  balances;·
              our
                  belief that certain deficiencies in our internal control and procedures
                  have been remediated;·
              our
                  ability to fund our working capital and exploration and development
                  expenditures; and·
              factors
                  impacting our results of
                  operations.
  These
        forward looking statements are subject to numerous risks, uncertainties and
        assumptions, including unexpected changes in business and economic conditions;
        significant increases or decreases in gold, silver, or lead prices; timing
        and
        amount of production changes in mining and milling costs; pit slides at our
        mining properties; results of current and future exploration activities;
        weather
        fluctuations; and other factors discussed in our Annual Report on Form 10-K
        for
        the year ended December 31, 2004. We disclaim any obligation to update forward
        looking statements, whether as a result of new information, future events
        or
        otherwise.
  **ACCOUNTING
        PRINCIPLES, REPORTING CURRENCY AND OTHER INFORMATION**
  Apollo
        Gold Corporation prepares its consolidated financial statements in accordance
        with accounting principles generally accepted in Canada and publishes its
        financial statements in United States dollars. This Quarterly Report on Form
        10-Q should be read in conjunction with our consolidated financial statements
        and related notes included in this quarterly report, as well as our annual
        financial statements for the fiscal year ended December 31, 2004 included
        in our Annual Report on Form 10-K. Certain classifications have been made
        to the
        prior period financial statements to conform with the current period
        presentation.
  2
  Unless
        stated otherwise, all dollar amounts are expressed in United States
        dollars.
  References
        to “we,”“our,”  “us,” the “Company” or “Apollo” mean Apollo Gold
        Corporation and its consolidated subsidiaries, or to any one or more of them,
        as
        the context requires.
  **NON-GAAP
        FINANCIAL INFORMATION**
  Cash
        operating, total cash and total production costs are non-GAAP financial measures
        and are used by management to assess performance of individual operations
        as
        well as a comparison to other gold producers. We have included cash operating
        costs information to provide investors with information about the cost structure
        of our mining operations.
  The
        term
“cash operating costs” is used on a per ounce of gold basis. Cash operating
        costs per ounce is equivalent to direct operating cost as found on the
        Consolidated Statements of Operations, less production royalty expenses and
        mining taxes but includes by-product credits for payable silver, lead and
        zinc.
  The
        term
“total cash costs” is equivalent to cash operating costs plus production
        royalties and mining taxes.
  The
        term
“total production costs” is equivalent to total cash costs plus non-cash costs
        including depreciation and amortization.
  This
        information differs from measures of performance determined in accordance
        with
        generally accepted accounting principles (GAAP) in Canada and the United
        States
        and should not be considered in isolation or a substitute for measures of
        performance prepared in accordance with GAAP. These measures are not necessarily
        indicative of operating profit or cash flow from operations as determined
        under
        GAAP and may not be comparable to similarly titled measures of other companies.
        See Item 2, Management’s Discussion and Analysis of Financial Condition and
        Results of Operations, for a reconciliation of these non-GAAP measures to
        our
        Statements of Operations.
  **PART
        I** **FINANCIAL
        INFORMATION**
  **ITEM
        1.** **FINANCIAL
        STATEMENTS**
  These
        consolidated financial statements should be read in conjunction with the
        financial statements, accompanying notes and other relevant information included
        in the Company’s Annual Report on Form 10-K for the year ended December 31,
        2004 filed with the Securities and Exchange Commission on March 16,
        2005 **.**
  3
  **APOLLO
        GOLD CORPORATION**
  **CONSOLIDATED
        BALANCE SHEETS**
 **(In
        thousands of United States Dollars)**
 **(Unaudited)**
 **September
                  30,**
                **2005**
              
              **December 31,**
                **2004****(Restated
                  -**
                **Note
                  3(b))**AssetsCurrentCash
                  and cash equivalents
              
              $
              309
              
              $
              6,886Accounts
                  receivable
              
              
              3,257
              
              
              2,963Prepaids
              
              
              179
              
              
              109Inventories
              
              
              1,849
              
              
              2,192Current
                  assets held for sale (Note 4)
              
              
              9,089
              
              
              10,510Total
                  Current Assets
              
              
              14,683
              
              
              22,660Property,
                  plant and equipment
              
              
              39,979
              
              
              37,599Restricted
                  certificate of deposit
              
              
              5,715
              
              
              4,371Deferred
                  financing costs
              
              
              1,145
              
              
              901Non-current
                  assets held for sale (Note 4)
              
              
              23,074
              
              
              32,104Total
                  Assets
              
              $
              84,596
              
              $
              97,635LiabilitiesCurrentAccounts
                  payable
              
              $
              6,458
              
              $
              5,942Accrued
                  liabilities
              
              
              1,992
              
              
              1,860Notes
                  payable
              
              
              501
              
              
              789Property
                  and mining taxes payable
              
              
              1,287
              
              
              1,070Current
                  liabilities held for sale (Note 4)
              
              
              3,953
              
              
              8,224Total
                  Current Liabilities
              
              
              14,191
              
              
              17,885Notes
                  payable and long-term liability
              
              
              54
              
              
              423Convertible
                  debentures
              
              
              6,368
              
              
              5,538Accrued
                  site closure costs
              
              
              12,390
              
              
              11,753Non-current
                  liabilities held for sale (Note 4)
              
              
              15,192
              
              
              14,815Total
                  Liabilities
              
              
              48,195
              
              
              50,414Continuing
                  operations (Note 1)Shareholders’
                  EquityShare
                  capital (Note 5)
              
              
              148,079
              
              
              141,795Issuable
                  common shares
              
              
              231
              
              
              231Equity
                  component of convertible debentures
              
              
              1,809
              
              
              1,815Note
                  warrants
              
              
              781
              
              
              781Contributed
                  surplus
              
              
              10,489
              
              
              9,627Deficit
              
              
              (124,988
              )
              
              (107,028
              )Total
                  Shareholders’ Equity
              
              
              36,401
              
              
              47,221Total
                  Liabilities and Shareholders’ Equity
              
              $
              84,596
              
              $
              97,635
 
 The
        accompanying notes are an integral part of these interim consolidated financial
        statements.
  4
  **APOLLO
        GOLD CORPORATION**
  **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **(In
        thousands of United States Dollars, except for share and per share
        amounts)**
 **(Unaudited)**
 
 **Three
                  months ended**
                **September
                  30,**
              
              **Nine
                  months ended**
                **September
                  30,****2005**
              
              **2004**
              
              **2005**
              
              **2004****(Restated
                  -****Notes**
                **3(b)
                  and 7)**
              
              
              
              **(Restated
                  -****Notes**
                **3(b)
                  and 7)**RevenueRevenue
                  from sale of minerals
              
              $
              13,351
              
              $
              7,393
              
              $
              36,264
              
              $
              25,542Operating
                  ExpensesDirect
                  operating costs
              
              
              14,162
              
              
              12,627
              
              
              40,273
              
              
              39,815Depreciation
                  and amortization
              
              
              672
              
              
              674
              
              
              2,006
              
              
              1,907General
                  and administrative expenses
              
              
              866
              
              
              1,087
              
              
              3,732
              
              
              4,325Stock-based
                  compensation
              
              
              171
              
              
              388
              
              
              525
              
              
              487Accretion
                  expense - accrued site closure costs
              
              
              242
              
              
              479
              
              
              636
              
              
              560Exploration
                  and business development
              
              
              173
              
              
              515
              
              
              731
              
              
              77416,286
              
              
              15,770
              
              
              47,903
              
              
              47,868Operating
                  (Loss)
              
              
              (2,935
              )
              
              (8,377
              )
              
              (11,639
              )
              
              (22,326
              )Other
                  Income (Expenses)Interest
                  income
              
              
              105
              
              
              10
              
              
              278
              
              
              261Interest
                  expense
              
              
              (747
              )
              
              (30
              )
              
              (1,940
              )
              
              (113
              )(Loss)
                  gain on sale of property, plant and equipment
              
              
              (42
              )
              
              -
              
              
              1,323
              
              
              -Foreign
                  exchange gain (loss) and other
              
              
              5
              
              
              (79
              )
              
              (28
              )
              
              (567
              )(Loss)
                  from continuing operations
              
              
              (3,614
              )
              
              (8,476
              )
              
              (12,006
              )
              
              (22,745
              )(Loss)
                  from discontinued operations
                (Note
                  4)
              
              
              (3,599
              )
              
              (2,753
              )
              
              (5,954
              )
              
              (2,521
              )Net
                  (loss) for the period
              
              $
              (7,213
              )
              $
              (11,229
              )
              $
              (17,960
              )
              $
              (25,266
              )Basic
                  and diluted net (loss) per share from:Continuing
                  operations
              
              $
              (0.04
              )
              $
              (0.11
              )
              $
              (0.12
              )
              $
              (0.29
              )Discontinued
                  operations
              
              
              (0.03
              )
              
              (0.03
              )
              
              (0.06
              )
              
              (0.03
              )$
              (0.07
              )
              $
              (0.14
              )
              $
              (0.18
              )
              $
              (0.32
              )Weighted
                  average number of shares outstanding
              
              
              106,556,451
              
              
              79,617,391
              
              
              100,106,695
              
              
              77,924,423
 
 The
        accompanying notes are an integral part of these interim consolidated financial
        statements.
  5
  **APOLLO
        GOLD CORPORATION**
  **CONSOLIDATED
        STATEMENTS OF SHAREHOLDERS’ EQUITY**
 **(In
        thousands of United States Dollars, except for number of
        shares)**
 **(Unaudited)**
 ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                **Equity**
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ********
                ****
                
                ****
                ****
                ****
                ****
                ****
                **Component**
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ******Share
                      Capital**
                
                
                **Issuable**
                ****
                ****
                **of**
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ****
                ********
                ****
                ****
                **Number
                    of**
                ****
                ****
                ****
                ****
                ****
                **Common**
                ****
                ****
                **Convertible**
                ****
                ****
                **Note**
                ****
                ****
                **Contributed**
                ****
                ****
                ****
                ****
                ****
                ****
                ********
                ****
                **Shares**
                ****
                ****
                **Amount**
                ****
                ****
                **Shares**
                ****
                ****
                **Debentures**
                ****
                ****
                **Warrant**
                ****
                ****
                **Surplus**
                ****
                ****
                **Deficit**
                ****
                ****
                **Total**Balance,
                    December 31, 2003
                
                
                73,539,790
                
                $
                120,881
                
                $
                231
                
                $
                -
                
                $
                -
                
                $
                12,766
                
                $
                (51,988
                )
                $
                81,890Cumulative
                    effect of change in accounting policy (Note 3(b))
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (24,033
                )
                
                (24,033
                )Adjusted
                    balance, December 31, 2003
                
                
                73,539,790
                
                
                120,881
                
                
                231
                
                
                -
                
                
                -
                
                
                12,766
                
                
                (76,021
                )
                
                57,857Units
                    issued for cash
                
                
                8,299,999
                
                
                4,873
                
                
                -
                
                
                -
                
                
                -
                
                
                622
                
                
                -
                
                
                5,495Conversion
                    of special warrants
                
                
                2,326,666
                
                
                1,449
                
                
                -
                
                
                -
                
                
                -
                
                
                50
                
                
                -
                
                
                1,499Flow-through
                    common shares
                
                
                714,285
                
                
                515
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                515Warrants
                    exercised
                
                
                5,399,848
                
                
                12,695
                
                
                -
                
                
                -
                
                
                -
                
                
                (4,083
                )
                
                -
                
                
                8,612Options
                    exercised
                
                
                399,054
                
                
                966
                
                
                -
                
                
                -
                
                
                -
                
                
                (647
                )
                
                -
                
                
                319Shares
                    reacquired and cancelled
                
                
                (20,500
                )
                
                (48
                )
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (48
                )Shares
                    issued for Huizopa interest
                
                
                48,978
                
                
                88
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                88Shares
                    issued for 2003 share-basedcompensation
                
                
                265,000
                
                
                376
                
                
                -
                
                
                -
                
                
                -
                
                
                (376
                )
                
                -
                
                
                -Bridge
                    loan compensation warrants
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                275
                
                
                -
                
                
                275Equity
                    component of convertible debentures
                
                
                -
                
                
                -
                
                
                -
                
                
                1,815
                
                
                -
                
                
                63
                
                
                -
                
                
                1,878Note
                    warrant
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                781
                
                
                27
                
                
                -
                
                
                808Debenture
                    compensation warrants
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                163
                
                
                -
                
                
                163Stock-basedcompensation
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                767
                
                
                -
                
                
                767Net
                    loss (Note 3(b))
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (31,007
                )
                
                (31,007
                )Balance,
                    December 31, 2004
                
                
                90,973,120
                
                
                141,795
                
                
                231
                
                
                1,815
                
                
                781
                
                
                9,627
                
                
                (107,028
                )
                
                47,221Unit
                    issued for cash
                
                
                4,199,998
                
                
                2,567
                
                
                -
                
                
                -
                
                
                -
                
                
                194
                
                
                -
                
                
                2,761Shares
                    issued for Huizopa interest restructuring
                
                
                1,000,000
                
                
                410
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                410Shares
                    issued for cash
                
                
                10,000,000
                
                
                3,184
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                3,184Conversion
                    of convertible debentures
                
                
                33,333
                
                
                23
                
                
                -
                
                
                (6
                )
                
                -
                
                
                -
                
                
                -
                
                
                17Engagement
                    fee shares and
                  warrants
                
                
                350,000
                
                
                100
                
                
                -
                
                
                -
                
                
                -
                
                
                143
                
                
                -
                
                
                243Stock-basedcompensation
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                525
                
                
                -
                
                
                525Net
                    loss
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                (17,960
                )
                
                (17,960
                )Balance,
                    September 30, 2005
                
                
                106,556,451
                
                $
                148,079
                
                $
                231
                
                $
                1,809
                
                $
                781
                
                $
                10,489
                
                $
                (124,988
                )
                $
                36,401
 The
          accompanying notes are an integral part of these interim consolidated financial
          statements.
  6
  **APOLLO
        GOLD CORPORATION**
  **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **(In
        thousands of United States Dollars)**
 **(Unaudited)**
  **Three
                  months ended**
                **September
                  30,**
              
              **Nine
                  months ended**
                **September
                  30,****2005**
              
              **2004**
              
              **2005**
              
              **2004**(Restated
                  -
                Notes
                  3(b)
                and
                  7)
              
              
              
              (Restated
                    -
                  Notes
                    3(b)
                  and
                    7)Operating
                  ActivitiesLoss
                  from continuing operations for the period
              
              $
              (3,614
              )
              $
              (8,476
              )
              $
              (12,006
              )
              $
              (22,745
              )Items
                  not affecting cashDepreciation
                  and amortization
              
              
              672
              
              
              674
              
              
              2,006
              
              
              1,907Amortization
                  of deferred financing costs
              
              
              80
              
              
              -
              
              
              239
              
              
              -Stock-based
                  compensation
              
              
              171
              
              
              388
              
              
              525
              
              
              487Accretion
                  expense - accrued site closure costs
              
              
              242
              
              
              479
              
              
              636
              
              
              560Accretion
                  expense - convertible debentures
              
              
              221
              
              
              -
              
              
              850
              
              
              -Loss
                  (gain) on sale of property, plant and equipment
              
              
              42
              
              
              -
              
              
              (1,323
              )
              
              -Net
                  change in non-cash operating working capital items
              
              
              (614
              )
              
              4,059
              
              
              1,025
              
              
              5,491Discontinued
                  operations
              
              
              872
              
              
              (24
              )
              
              1,358
              
              
              (1,960
              )(1,928
              )
              
              (2,900
              )
              
              (6,690
              )
              
              (16,260
              )Investing
                  ActivitiesProperty,
                  plant and equipment expenditures
              
              
              (1,037
              )
              
              (4,051
              )
              
              (4,736
              )
              
              (11,346
              )Short-term
                  investments
              
              
              -
              
              
              7,446
              
              
              -
              
              
              5,855Proceeds
                  from disposal of property, plant and equipment
              
              
              9
              
              
              -
              
              
              2,000
              
              
              -Restricted
                  certificate of deposit and other assets
              
              
              (733
              )
              
              (437
              )
              
              (1,584
              )
              
              (885
              )Discontinued
                  operations
              
              
              (318
              )
              
              (2,586
              )
              
              1,003
              
              
              (7,460
              )(2,079
              )
              
              372
              
              
              (3,317
              )
              
              (13,836
              )Financing
                  ActivitiesProceeds
                  on issuance of shares
              
              
              -
              
              
              71
              
              
              5,944
              
              
              8,931Acquisition
                  and cancellation of shares
              
              
              -
              
              
              -
              
              
              -
              
              
              (48
              )Payments
                  of notes payable
              
              
              (192
              )
              
              (453
              )
              
              (756
              )
              
              (1,289
              )Discontinued
                  operations
              
              
              (368
              )
              
              (697
              )
              
              (1,758
              )
              
              (1,945
              )(560
              )
              
              (1,079
              )
              
              3,430
              
              
              5,649Net
                  (decrease) in cash
              
              
              (4,567
              )
              
              (3,607
              )
              
              (6,577
              )
              
              (24,447
              )Cash
                  and cash equivalents, beginning of period
              
              
              4,876
              
              
              4,992
              
              
              6,886
              
              
              25,832Cash
                  and cash equivalents, end of period
              
              $
              309
              
              $
              1,385
              
              $
              309
              
              $
              1,385Supplemental
                  Cash Flow Information:Interest
                  paid
              
              $
              298
              
              $
              80
              
              $
              923
              
              $
              287
  During
        the three months ended September 30, 2005 and 2004, property, plant and
        equipment of $99 and $19, respectively, were acquired under a capital lease
        arrangement.
  During
        the nine months ended September 30, 2004, property, plant and equipment totaling
        $340 was acquired under a capital lease arrangement.
  During
        the nine months ended September 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.
  During
        the nine months ended September 30, 2004, the company issued 48,978 shares
        to
        meet the earn-in requirements of the Huizopa joint venture agreement. Share
        capital and property, plant and equipment both increased by $88 as a result
        of
        this transaction.
  The
        accompanying notes are an integral part of these interim consolidated financial
        statements.
  7
  **APOLLO
        GOLD CORPORATION**
 **Notes
          to the Consolidated Financial Statements**
 **Nine
          month period ended September 30, 2005**
 **(Stated
          in United States Dollars; tabular amounts in thousands, except for share
          and per
          share amounts)**
 **(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, Apollo has funded its operations
        primarily through issuances of debt and equity securities plus the sale of
        some
        surplus assets. The Company’s current funds are not sufficient to complete the
        planned underground drilling program and produce a bankable feasibility study
        in
        2006 at the Black Fox Project and commence an exploration program at its
        Huizopa
        project. In May 2005 the Company adopted a plan to dispose of its Nevada
        assets
        (the “Nevada Assets”) (the Florida Canyon Mine, Standard Mine and four
        exploration properties) (see Note 4) and on October 17, 2005, the
        Company
        executed a stock purchase agreement (the “Agreement”), pursuant to which the
        Company has agreed to sell to Jipangu Inc., a Delaware corporation and wholly
        owned subsidiary of Jipangu International Inc., a Japanese corporation, all
        of
        the issued and outstanding stock of Florida Canyon Mining Inc., Standard
        Gold
        Mining Inc., and Apollo Gold Exploration Inc. for $14.0 million. In
        addition, Apollo entered into a Subscription Agreement with Jipangu for a
        $3.5 million private placement pursuant to which Jipangu would purchase
        up
        to 11,650,000 units of Apollo priced at Cdn$0.35 per unit, with each unit
        consisting of one common share of Apollo and 0.1716 of a warrant with each
        whole
        warrant exercisable for two years at Cdn$0.39 for one common share of Apollo.
        The closing of the Agreement is subject to certain conditions. The Company
        expects to use approximately $10.9 million of the proceeds from the
        sale of
        the Nevada Assets to secure the Company’s convertible debentures, currently
        secured by the Nevada Assets, with the balance used to supplement the funding
        of
        the Company’s general and administrative expenses, the development of Black Fox,
        exploration at Huizopa, the Montana Tunnels operations and other general
        corporate purposes. External financing would be required to further develop
        and
        construct 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
        sell the Nevada Assets, successfully generate cash flow from its mines, or
        secure additional financing and therefore be unable to continue as a going
        concern, then 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 by-product metals, as well as related activities including
        exploration and development. The Company currently owns and operates the
        Montana
        Tunnels Mine, an open pit mine and mill, producing gold doré and lead-gold and
        zinc-gold concentrates located in the State of Montana. The Company also
        owns
        the Diamond Hill Mine, currently under care and maintenance, also located
        in the
        State of Montana.
  Apollo
        has a development property, the Black Fox Project, which is located 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 exploration project, located in the Sierra Madre gold belt in Chihuahua,
        Mexico. Pursuant to an agreement with the previous owner of one of those
        Mexican
        subsidiaries (the “Previous Owner”), if Apollo exercises its right to acquire
        those concessions at the Huizopa project on which it currently holds an option,
        one of Apollo’s Mexican subsidiaries and a Mexican company owned by the Previous
        Owner will enter into a joint venture agreement governing activities at the
        Huizopa project going forward, pursuant to which Apollo can elect to ultimately
        retain up to an 80% interest in the Huizopa project. If Apollo’s Mexican
        subsidiary chooses not to go forward with the Huizopa project, it is obligated
        to transfer a controlling interest in the subsidiary that holds the option
        back
        to the Previous Owner, and to transfer 91% of the concessions it owns at
        the
        Huizopa Project back to the Previous Owner.
  8
 **APOLLO
          GOLD CORPORATION**
 **Notes
            to the Consolidated Financial Statements**
 **Nine
            month period ended September 30, 2005**
 **(Stated
            in United States Dollars; tabular amounts in thousands, except for share
            and per
            share amounts)**
 **(Unaudited)**
  **2.**
              **NATURE
                  OF OPERATIONS (Continued)**
  The
        Company’s assets held for sale, the Nevada Assets (Note 4), include the Florida
        Canyon Mine, an open pit heap leach operation located in the State of Nevada;
        the Standard Mine, an open pit heap leach operation situated 8 kilometers
        south
        of the Florida Canyon Mine, which shares common facilities, such as warehousing,
        administration and the gold recovery plant with the Florida Canyon Mine;
        and
        four exploration properties located near the Florida Canyon Mine. Mining
        activities at the Florida Canyon Mine were temporarily suspended on March
        1,
        2005, although gold production continues from the leach pad. The Standard
        Mine
        was developed during 2004 and 2005 and entered into commercial production
        on
        June 1, 2005.
  **3.**
              **ACCOUNTING
                  POLICIES**
  *(a)*
              These
                  unaudited consolidated interim financial statements have been prepared
                  in
                  accordance with Canadian generally accepted accounting principles
                  (“Canadian GAAP”) and except as described in Note 9, conform in all
                  material respects with accounting principles generally accepted
                  in the
                  United States (“U.S. GAAP”). The accounting policies followed in preparing
                  these financial statements are those used by the Company as set
                  out in the
                  audited financial statements for the year ended December 31,
                  2004,
                  except as disclosed in (b) below. Certain information and note
                  disclosures
                  normally included in consolidated financial statements prepared
                  in
                  accordance with Canadian GAAP have been omitted. These interim
                  financial
                  statements should be read together with the Company’s audited financial
                  statements for the year ended December 31,
                  2004.
  In
        the
        opinion of management, all adjustments considered necessary for fair
        presentation have been included in these financial statements. Interim results
        are not necessarily indicative of the results expected for the fiscal
        year.
  Certain
        of the comparative figures have been reclassified to conform to the current
        period presentation. In particular, the assets and liabilities of the Nevada
        Assets as at December 31, 2004 and their results of operations and cash flows
        for the three and nine months ended September 30, 2004 (Note 4) have been
        reclassified as held for sale and discontinued operations,
        respectively.
  *(b)*
              On
                  March 30, 2005, the Financial Accounting Standards Board (“FASB”) ratified
                  the consensus of the Emerging Issues Task Force (“EITF”) Issue 04-6 that
                  stripping costs incurred during the production phase of a mine
                  are
                  variable production costs that should be included in the costs
                  of the
                  inventory produced during the period that the stripping costs are
                  incurred.
  In
        the
        first quarter of 2005 and prior periods, Apollo deferred or accrued stripping
        costs incurred during production, as appropriate, and charged these costs
        to
        operations on the basis of the estimated average stripping ratio for Montana
        Tunnels. Commencing in the second quarter of 2005, Apollo changed its accounting
        policy under Canadian GAAP and U.S. GAAP with respect to stripping costs
        to be
        consistent with the consensus reached by the EITF, on the basis that the
        consensus results in a more reliable, relevant and consistent application
        of
        GAAP. This change has been applied retrospectively by restating prior periods.
        The effect of this change was to increase the deficit at January 1, 2004
        by
        $24,033,000 and to increase the net loss for the year ended December 31,
        2004 by
        $12,818,000 ($0.16 per share). The net loss for the three months and nine
        months
        ended September 30, 2004 increased by $4,097,000 ($0.05 per share) and
        $11,446,000 ($0.15 per share), respectively, as a result of this
        change.
  9
 **APOLLO
            GOLD CORPORATION**
 **Notes
              to the Consolidated Financial Statements**
 **Nine
              month period ended September 30, 2005**
 **(Stated
              in United States Dollars; tabular amounts in thousands, except for
              share and per
              share amounts)**
 **(Unaudited)**
 **4.**
              **ASSETS
                  HELD FOR SALE**
  During
        the second quarter, the Company adopted a plan to dispose of its Nevada Assets.
        When management identifies an asset held for sale, the company estimates
        the net
        selling price and the Company recorded an impairment in the second
        quarter
        2005 of $4.6 million. On October 17, 2005, Apollo entered into
        an
        agreement with Jipangu for the sale of the Nevada Assets for $14.0 million,
        resulting in the Company recording an additional impairment of
        $3.9 million, for a total impairment at September 30, 2005
        of
        $8.4 million.
  The
        following tables present summarized financial information related to
        discontinued operations:
  **September 30,
                  2005**
              
              **December 31,
                  2004**ASSETSCash
                  and cash equivalents
              
              $
              16
              
              $
              61Broken
                  ore on leach pad - current
              
              
              7,700
              
              
              8,960Other
                  non-cash current assets
              
              
              1,373
              
              
              1,489Current
                  assets held for sale
              
              
              9,089
              
              
              10,510Broken
                  ore on leach pad - long-term
              
              
              4,020
              
              
              4,824Property,
                  plant and equipment
              
              
              21,699
              
              
              20,945Restricted
                  certificate of deposit
              
              
              5,780
              
              
              4,995Deferred
                  loss on commodity contracts (Note 7)
              
              
              -
              
              
              1,340Less:
                  impairment
              
              
              (8,425
              )
              
              -Non-current
                  assets held for sale
              
              
              23,074
              
              
              32,104Total
                  assets held for sale
              
              
              32,163
              
              
              42,614LIABILITIESCurrent
                  liabilities held for sale
              
              
              3,953
              
              
              8,224Notes
                  payable
              
              
              -
              
              
              376Accrued
                  site closure costs
              
              
              15,192
              
              
              14,439Non-current
                  liabilities held for sale
              
              
              15,192
              
              
              14,815Total
                  liabilities held for sale
              
              
              19,145
              
              
              23,039Net
                  assets held for sale
              
              $
              13,018
              
              $
              19,575
  10
 **APOLLO
            GOLD CORPORATION**
 **Notes
              to the Consolidated Financial Statements**
 **Nine
              month period ended September 30, 2005**
 **(Stated
              in United States Dollars; tabular amounts in thousands, except for
              share and per
              share amounts)**
 **(Unaudited)**
 **4.**
              **ASSETS
                  HELD FOR SALE (Continued)**
 **Three
                            months ended**September
                          30,
                      
                      
                      **Nine
                          months ended**
                        **September
                          30,**2005
                      
                      
                      2004
                      
                      
                      2005
                      
                      
                      2004Revenue
                          from sale of minerals (Note 7)
                      
                      $
                      6,582
                      
                      $
                      4,957
                      
                      $
                      14,677
                      
                      $
                      20,063Direct
                          operating costs
                      
                      
                      5,935
                      
                      
                      5,959
                      
                      
                      13,829
                      
                      
                      19,518Depreciation
                          and amortization
                      
                      
                      -
                      
                      
                      618
                      
                      
                      776
                      
                      
                      1,987Accretion
                          expense
                      
                      
                      280
                      
                      
                      304
                      
                      
                      737
                      
                      
                      914Royalty
                          expenses
                      
                      
                      65
                      
                      
                      133
                      
                      
                      231
                      
                      
                      507Exploration
                          and businessdevelopment
                      
                      
                      28
                      
                      
                      -
                      
                      
                      217
                      
                      
                      -Impairment
                      
                      
                      3,861
                      
                      
                      -
                      
                      
                      8,425
                      
                      
                      -10,169
                      
                      
                      7,014
                      
                      
                      24,215
                      
                      
                      22,926Operating
                          loss
                      
                      
                      (3,587
                      )
                      
                      (2,057
                      )
                      
                      (9,538
                      )
                      
                      (2,863
                      )Interest
                          expense
                      
                      
                      (12
                      )
                      
                      (50
                      )
                      
                      (69
                      )
                      
                      (174
                      )Gain
                          on sale of property, plant and equipment
                      
                      
                      -
                      
                      
                      -
                      
                      
                      3,615
                      
                      
                      -Realized
                          and unrealized gain (loss) on commodity contracts (Note
                          7)
                      
                      
                      -
                      
                      
                      (646
                      )
                      
                      38
                      
                      
                      516(Loss)
                          from discontinued operations
                      
                      $
                      (3,599
                      )
                      $
                      (2,753
                      )
                      $
                      (5,954
                      )
                      $
                      (2,521
                      )
 **5.**
              **SHARE
                  CAPITAL**
  *(a)*
              *Shares
                  issued in 2005*
  (i)
              On
                  January 7, 2005, the Company completed the second tranche of a
                  private
                  placement of 4,199,998 units with a purchase price of $0.75 for
                  net
                  proceeds of $2.8 million, net of expenses $0.3 million and fair
                  value of
                  broker’s compensation warrants of $0.2 million. Each unit is comprised
                  of
                  one common share of the Company and 0.75 share purchase warrant,
                  with each
                  whole share purchase warrant exercisable into one common share
                  of the
                  Company for two years at an exercise price of $1.00 per share.
                  In
                  connection with the first and second tranches, 1,250,000 broker
                  compensation warrants were issued. (See Note 5(b) for a
                  description
                  of the broker compensation
                  warrants.)
  11
 **APOLLO
            GOLD CORPORATION**
 **Notes
              to the Consolidated Financial Statements**
 **Nine
              month period ended September 30, 2005**
 **(Stated
              in United States Dollars; tabular amounts in thousands, except for
              share and per
              share amounts)**
 **(Unaudited)**
  **5.**
                **SHARE
                    CAPITAL (Continued)**
  (ii)
              During
                  the nine months ended September 30, 2005, the Company restructured
                  its
                  existing earn-in joint venture arrangement with Argonaut at the
                  Huizopa
                  project in Mexico and issued 1,000,000 common shares to Argonaut
                  in
                  consideration for such restructuring. The shares issued were valued
                  at
                  $410,000 and recorded as property, plant and equipment within the
                  balance
                  sheet. Following this restructuring, the Company’s Mexican subsidiary owns
                  Argonaut’s former subsidiary which has a contractual interest in two of
                  the concessions at the project and the Company no longer has any
                  earn-in
                  requirement for the project, although it will still be responsible
                  for the
                  underlying payments to the landowner at the project, and the payments
                  and
                  performance or obligations required to maintain those
                  concessions.
  (iii)
              On
                  June
                  3, 2005, the Company completed the issuance to Jipangu Inc. (“Jipangu”) of
                  10,000,000 common shares at $0.32 (Cdn$0.40) per share for proceeds
                  of
                  $3.2 million, net of issue expenses of $32,000. On October 17,
                  2005,
                  the Company entered into an agreement with Jipangu
                  for the sale
                  of its Nevada Assets for $14.0 million. In addition, the
                  Company
                  entered into a Subscription Agreement with Jipangu for a $3.5 million
                  private placement pursuant to which,
                  if the sale of the Nevada Assets is completed,Jipangu
                  would purchase up to 11,650, 000 units of Apollo priced at
                  Cdn$0.35 per unit, with each unit consisting of one common
                  share of
                  Apollo and 0.17167 of a warrant (for a total of up to 2,000,000
                  warrants)
                  with each whole warrant exercisable for two years at Cdn$0.39 for
                  one
                  common share of Apollo. If the sale of the Nevada Assets is not
                  completed,
                  Jipangu would have the option to invest up to $3.5 million in a
                  private
                  placement under certain
                  circumstances.
  (iv)
              On
                  June 30, 2005, the Company issued 350,000 common shares
                  of the
                  Company and 1,250,000 common share purchase warrants of the Company,
                  with
                  each warrant immediately exercisable into one common share of the
                  company
                  at an exercise price of Cdn$0.40 and an expiry date of June 30,
                  2007 to
                  BMO Nesbitt Burns Inc. (“BMO”) as an engagement fee to act as a financial
                  adviser to the Company with respect to the sale of the Nevada Assets.
                  In
                  addition, the Company has agreed to issue BMO 900,000 common shares
                  of the
                  Company upon closing of the Agreement to sell the Nevada Assets
                  to Jipangu
                  during the BMO engagement or within the following 12 months.
  The
        1,250,000 common share purchase warrants were fair valued using an option
        pricing model with the following assumptions: no dividends are paid, a
        volatility of the Company’s share price of 78%, an expected life of the warrants
        of two years, and an annual risk-free rate of 3.6%.
  12
 **APOLLO
            GOLD CORPORATION**
 **Notes
              to the Consolidated Financial Statements**
 **Nine
              month period ended September 30, 2005**
 **(Stated
              in United States Dollars; tabular amounts in thousands, except for
              share and per
              share amounts)**
 **(Unaudited)**
 **** **5.**
                **SHARE
                    CAPITAL (Continued)**
 
 *(b)*
              *Warrants*
  The
        following summarizes outstanding warrants as at September 30, 2005:
  **Warrants**
              
              **Number
                  of**
                **Shares**
              
              **Exercise**
                **Price**
              
              **Expiry**
                **Date**63,969
              
              
              63,969
              
              $
              1.67
              
              
              October
                  27, 20051,000,000
              
              
              1,000,000
              
              
              0.80
              
              
              October
                  19, 20061,400,133
              
              
              1,400,133
              
              
              0.80
              
              
              November
                  4, 20063,000,000
              
              
              3,000,000
              
              
              2.10
              
              
              December
                  23, 20066,224,999
              
              
              6,224,999
              
              
              1.00
              
              
              December
                  31, 20063,149,998
              
              
              3,149,998
              
              
              1.00
              
              
              January
                  7, 20071,250,000
              
              
              1,250,000
              
              
              0.33
              
              
              June
                  30, 20075,253,600
              
              
              5,253,600
              
              
              0.80
              
              
              November
                  4, 20071,396,000
              
              
              1,396,000
              
              
              0.80
              
              
              November
                  4, 200722,738,699
              
              
              22,738,699
  In
        addition, 1,250,000 broker compensation warrants were issued and were
        immediately exercisable on January 7, 2005. The broker compensation
        warrants were issued in connection with the first and second tranches of
        the
        private placement described in Note 5(a)(i). Each broker compensation
        warrant is exercisable at $0.75 into one common share of the Company and
        0.75 of
        a share purchase warrant, with each whole share purchase warrant exercisable
        into one common share of the Company at $1.00 per common share. The broker
        compensation warrants expire on January 7, 2007. The share purchase
        warrants are exercisable for two years from the date of issue.
 
 The
        63,969 warrants with an expiry date of October 27, 2005 expired
        unexercised.
 
 *(c)*
              *Options*
  A
        summary
        of information concerning outstanding stock options at September 30, 2005
        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, 2004
              
              
              2,196,300
              
              $
              2.10
              
              
              1,904,756
              
              $
              0.80Options
                  granted
              
              
              2,739,700
              
              
              0.63
              
              
              -
              
              
              -Options
                  cancelled
              
              
              (853,400
              )
              
              (1.71
              )
              
              (110,174
              )
              
              0.80Balances,
                  September 30, 2005
              
              
              4,082,600
              
              $
              1.19
              
              
              1,794,582
              
              $
              0.80
 
 13
 **** **APOLLO
            GOLD CORPORATION**
 **Notes
              to the Consolidated Financial Statements**
 **Nine
              month period ended September 30, 2005**
 **(Stated
              in United States Dollars; tabular amounts in thousands, except for
              share and per
              share amounts)**
 **(Unaudited)**
 **5.**
                **SHARE
                    CAPITAL (Continued)**
 
 (i)
              *Fixed
                  stock option plan*
  The
        following table summarizes information concerning outstanding and exercisable
        fixed stock options at September 30, 2005:
  **Options
                  Outstanding**
              
              **Options
                  Exercisable****Number
                  Outstanding**
              
              **Expiry
                  Date**
              
              **Weighted
                  Average Exercise Price per Share**
              
              **Number
                  Exercisable**
              
              **Weighted
                  Average Exercise Price per Share**1,015,700
              
              
              February
                  18, 2013
              
              $
              2.24
              
              
              1,015,700
              
              $
              2.242,600
              
              
              March
                  28, 2013
              
              
              2.34
              
              
              2,600
              
              
              2.34100,000
              
              
              November
                  13, 2013
              
              
              1.67
              
              
              50,000
              
              
              1.67317,400
              
              
              March
                  10, 2014
              
              
              2.05
              
              
              158,700
              
              
              2.05135,000
              
              
              May
                  19, 2014
              
              
              1.44
              
              
              67,500
              
              
              1.4434,200
              
              
              August
                  10, 2014
              
              
              0.95
              
              
              17,100
              
              
              0.95600
              
              
              November
                  10, 2014
              
              
              0.60
              
              
              -
              
              
              -2,277,100
              
              
              March
                  10, 2015
              
              
              0.65
              
              
              -
              
              
              -100,000
              
              
              April
                  6, 2015
              
              
              0.39
              
              
              -
              
              
              -100,000
              
              
              August
                  4, 2015
              
              
              0.27
              
              
              -
              
              
              -4,082,600
              
              
              
              
              $
              1.19
              
              
              1,311,600
              
              $
              2.14
  (ii)
              *Performance-based
                  stock option plan*
  As
        at
        September 30, 2005, the 1,794,582 performance-based stock options were fully
        vested and have an expiry date of June 25, 2007.
  *(d)*
              *Stock-based
                  compensation*
  The
        fair
        value of each option granted is estimated at the time of grant using the
        Black-Scholes option pricing model with weighted average assumptions for
        grants
        as follows:
  **Nine
                  months ended**
                **September 30,****2005**
              
              **2004**Risk
                  free interest rate
              
              
              3.8
              %
              
              3.1
              %Dividend
                  yield
              
              
              0
              %
              
              0
              %Volatility
              
              
              74
              %
              
              56
              %Expected
                  life in years
              
              
              5
              
              
              5
  **6.**
              **INCOME
                  TAXES**
  The
        Company did not record a recovery for income taxes for the period ended
        September 30, 2005 as the net loss carry forwards are fully offset by a
        valuation allowance.
  14
 **APOLLO
            GOLD CORPORATION**
 **Notes
              to the Consolidated Financial Statements**
 **Nine
              month period ended September 30, 2005**
 **(Stated
              in United States Dollars; tabular amounts in thousands, except for
              share and per
              share amounts)**
 **(Unaudited)**
 **7.**
              **FINANCIAL
                  INSTRUMENTS AND RISK
                  MANAGEMENT**
  *Commodity
        contracts*
  In
        2003
        the Company entered into commodity contracts with Standard Bank London Limited
        for gold in the aggregate amount of 100,000 ounces involving the use of
        combinations of put and call options. As of September 30, 2005 there were
        no
        ounces remaining on these contracts. The contracts gave the holder the right
        to
        buy, and the Company the right to sell, stipulated amounts of gold with a
        put
        option strike price of $295 per ounce and a call option strike price of $345
        per
        ounce.
  The
        Company incorrectly accounted for the above commodity contracts with Standard
        Bank London Limited as hedges during each of the quarters ended March 31,
        June
        30 and September 30, 2004, respectively. Quarterly losses for 2004
        have
        been restated to reflect the correct accounting treatment for these commodity
        contracts. The previously reported and restated information as at and for
        the
        three and nine month periods ended September 30, 2004 is disclosed
        below:
  **Three
                  months ended**
                **September
                  30, 2004**
              
              **Nine
                  months ended**
                **September
                  30, 2004****As
                  reported**
              
              **As
                  restated**
              
              **As
                  reported**
              
              **As
                  restated***Statement
                  of Operations*Revenue
                  from discontinued operations (Note 4)
              
              $
              5,327
              
              $
              4,957
              
              $
              20,362
              
              $
              20,063Realized
                  and unrealized gain (loss) on commodity contracts (Note 4)
              
              
              -
              
              
              (646
              )
              
              -
              
              
              516Net
                  loss
              
              
              (10,213
              )
              
              (11,229
              )
              
              (25,483
              )
              
              (25,266
              )Deficit
              
              
              (101,504
              )
              
              (101,287
              )
              
              (101,504
              )
              
              (101,287
              )Basic
                  and diluted net loss per share
              
              
              (0.13
              )
              
              (0.14
              )
              
              (0.33
              )
              
              (0.32
              )
 
 15
 **APOLLO
            GOLD CORPORATION**
 **Notes
              to the Consolidated Financial Statements**
 **Nine
              month period ended September 30, 2005**
 **(Stated
              in United States Dollars; tabular amounts in thousands, except for
              share and per
              share amounts)**
 **(Unaudited)**
 **8.**
              **SEGMENTED
                  INFORMATION**
  Apollo
        operates the Montana Tunnels Mine in the United States and ownsthe 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 Nevada Assets
        have
        been reported as discontinued operations (Note 4). The accounting policies
        for
        these segments are the same as those followed by the Company as a
        whole.
  Amounts
        as at September 30, 2005 are as follows:
  **Montana
                  Tunnels**
              
              **Black
                  Fox**
              
              **Corporate
                  and Other**
              
              **Total**Cash
                  and cash equivalents
              
              $
              8
              
              $
              94
              
              $
              207
              
              $
              309Other
                  non-cash current assets
              
              
              5,047
              
              
              68
              
              
              170
              
              
              5,2855,055
              
              
              162
              
              
              377
              
              
              5,594Property,
                  plant and equipment
              
              
              14,742
              
              
              23,920
              
              
              1,317
              
              
              39,979Restricted
                  certificate of deposit
              
              
              4,851
              
              
              581
              
              
              283
              
              
              5,715Deferred
                  financing costs
              
              
              -
              
              
              -
              
              
              1,145
              
              
              1,145Total
                  assets of continuing operations
              
              $
              24,648
              
              $
              24,663
              
              $
              3,122
              
              $
              52,433Current
                  liabilities
              
              $
              7,467
              
              $
              127
              
              $
              2,644
              
              $
              10,238Notes
                  payable and convertible debentures
              
              
              24
              
              
              -
              
              
              6,398
              
              
              6,422Accrued
                  site closure costs
              
              
              12,390
              
              
              -
              
              
              -
              
              
              12,390Total
                  liabilities of continuing operations
              
              $
              19,881
              
              $
              127
              
              $
              9,042
              
              $
              29,050
 
 Amounts
        as at December 31, 2004 are as follows (restated - Note 3(b)):
  **Montana
                  Tunnels**
              
              **Black
                  Fox**
              
              **Corporate
                  and Other**
              
              **Total**Cash
                  and cash equivalents
              
              $
              (260
              )
              $
              53
              
              $
              7,093
              
              $
              6,886Other
                  non-cash current assets
              
              
              4,985
              
              
              151
              
              
              128
              
              
              5,2644,725
              
              
              204
              
              
              7,221
              
              
              12,150Property,
                  plant and equipment
              
              
              17,239
              
              
              19,560
              
              
              800
              
              
              37,599Restricted
                  certificate of deposit
              
              
              3,752
              
              
              562
              
              
              57
              
              
              4,371Deferred
                  financing costs
              
              
              -
              
              
              -
              
              
              901
              
              
              901Total
                  assets of continuing operations
              
              $
              25,716
              
              $
              20,326
              
              $
              8,979
              
              $
              55,021Current
                  liabilities
              
              $
              6,943
              
              $
              481
              
              $
              2,237
              
              $
              9,661Notes
                  payable
              
              
              423
              
              
              -
              
              
              5,538
              
              
              5,961Accrued
                  site closure costs
              
              
              11,753
              
              
              -
              
              
              -
              
              
              11,753Total
                  liabilities of continuing operations
              
              $
              19,119
              
              $
              481
              
              $
              7,775
              
              $
              27,375
 
 16
 **APOLLO
            GOLD CORPORATION**
 **Notes
              to the Consolidated Financial Statements**
 **Nine
              month period ended September 30, 2005**
 **(Stated
              in United States Dollars; tabular amounts in thousands, except for
              share and per
              share amounts)**
 **(Unaudited)**
 **8.**
              **SEGMENTED
                  INFORMATION (Continued)**
  Amounts
        for the three and nine month periods ended September 30, 2005 and 2004,
        respectively, are as follows:
  Three
                      Months ended
                    September
                      30, 2005**Montana
                      Tunnels**
                  
                  **Black
                      Fox**
                  
                  **Corporate
                      and Other**
                  
                  **Total**Revenue
                      from sale of minerals
                  
                  $
                  13,351
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  13,351Direct
                      operating costs
                  
                  
                  14,162
                  
                  
                  -
                  
                  
                  -
                  
                  
                  14,162Depreciation
                      and amortization
                  
                  
                  615
                  
                  
                  -
                  
                  
                  57
                  
                  
                  672General
                      and administrative expenses
                  
                  
                  -
                  
                  
                  -
                  
                  
                  866
                  
                  
                  866Stock-based
                      compensation
                  
                  
                  -
                  
                  
                  -
                  
                  
                  171
                  
                  
                  171Accretion
                      expense
                  
                  
                  242
                  
                  
                  -
                  
                  
                  -
                  
                  
                  242Exploration
                      and business development
                  
                  
                  -
                  
                  
                  -
                  
                  
                  173
                  
                  
                  17315,019
                  
                  
                  -
                  
                  
                  1,267
                  
                  
                  16,286Operating
                      loss
                  
                  
                  (1,668
                  )
                  
                  -
                  
                  
                  (1,267
                  )
                  
                  (2,935
                  )Interest
                      income
                  
                  
                  -
                  
                  
                  -
                  
                  
                  105
                  
                  
                  105Interest
                      expense
                  
                  
                  (14
                  )
                  
                  -
                  
                  
                  (733
                  )
                  
                  (747
                  )Foreign
                      exchange loss and other
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (37
                  )
                  
                  (37
                  )Loss
                      from continuing operations
                  
                  $
                  (1,682
                  )
                  $
                  -
                  
                  $
                  (1,932
                  )
                  $
                  (3,614
                  )Investing
                      activitiesProperty,
                      plant and equipment expenditures
                  
                  $
                  106
                  
                  $
                  870
                  
                  $
                  160
                  
                  $
                  1,136
   **Nine
                      months ended**
                    **September 30,
                      2005****Montana
                      Tunnels**
                  
                  **Black
                      Fox**
                  
                  **Corporate
                      and Other**
                  
                  **Total**Revenue
                      from sale of minerals
                  
                  $
                  36,264
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  36,264Direct
                      operating costs
                  
                  
                  40,273
                  
                  
                  -
                  
                  
                  -
                  
                  
                  40,273Depreciation
                      and amortization
                  
                  
                  1,885
                  
                  
                  -
                  
                  
                  121
                  
                  
                  2,006General
                      and administrative expenses
                  
                  
                  -
                  
                  
                  -
                  
                  
                  3,732
                  
                  
                  3,732Stock-based
                      compensation
                  
                  
                  -
                  
                  
                  -
                  
                  
                  525
                  
                  
                  525Accretion
                      expense
                  
                  
                  636
                  
                  
                  -
                  
                  
                  -
                  
                  
                  636Exploration
                      and business development
                  
                  
                  -
                  
                  
                  -
                  
                  
                  731
                  
                  
                  73142,794
                  
                  
                  -
                  
                  
                  5,109
                  
                  
                  47,903Operating
                      loss
                  
                  
                  (6,530
                  )
                  
                  -
                  
                  
                  (5,109
                  )
                  
                  (11,639
                  )Interest
                      income
                  
                  
                  -
                  
                  
                  -
                  
                  
                  278
                  
                  
                  278Interest
                      expense
                  
                  
                  (52
                  )
                  
                  -
                  
                  
                  (1,888
                  )
                  
                  (1,940
                  )Gain
                      (loss) on sale of property, plant and equipment
                  
                  
                  1,365
                  
                  
                  -
                  
                  
                  (42
                  )
                  
                  1,323Foreign
                      exchange loss and other
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (28
                  )
                  
                  (28
                  )Loss
                      from continuing operations
                  
                  $
                  (5,217
                  )
                  $
                  -
                  
                  $
                  (6,789
                  )
                  $
                  (12,006
                  )Investing
                      activitiesProperty,
                      plant and equipment expenditures
                  
                  $
                  197
                  
                  $
                  4,359
                  
                  $
                  689
                  
                  $
                  5,245
  17
 **APOLLO
            GOLD CORPORATION**
 **Notes
              to the Consolidated Financial Statements**
 **Nine
              month period ended September 30, 2005**
 **(Stated
              in United States Dollars; tabular amounts in thousands, except for
              share and per
              share amounts)**
 **(Unaudited)**
 **8.**
              **SEGMENTED
                  INFORMATION (Continued)**
  **Three
                  months ended September 30, 2004**
                **(Restated
                  - Note 3(b))****Montana
                  Tunnels**
              
              **Black
                  Fox**
              
              **Corporate
                  and Other**
              
              **Total**Revenue
                  from sale of minerals
              
              $
              7,393
              
              $
              -
              
              $
              -
              
              $
              7,393Direct
                  operating costs
              
              
              12,627
              
              
              -
              
              
              -
              
              
              12,627Depreciation
                  and amortization
              
              
              646
              
              
              -
              
              
              28
              
              
              674General
                  and administrative expenses
              
              
              -
              
              
              -
              
              
              1,087
              
              
              1,087Stock-based
                  compensation
              
              
              -
              
              
              -
              
              
              388
              
              
              388Accretion
                  expense
              
              
              479
              
              
              -
              
              
              -
              
              
              479Exploration
                  and business development
              
              
              -
              
              
              -
              
              
              515
              
              
              51513,752
              
              
              -
              
              
              2,018
              
              
              15,770Operating
                  income (loss)
              
              
              (6,359
              )
              
              -
              
              
              (2,018
              )
              
              (8,377
              )Interest
                  income
              
              
              -
              
              
              -
              
              
              10
              
              
              10Interest
                  expense
              
              
              (30
              )
              
              -
              
              
              -
              
              
              (30
              )Foreign
                  exchange loss and other
              
              
              (108
              )
              
              -
              
              
              29
              
              
              (79
              )Loss
                  from continuing operations
              
              $
              (6,497
              )
              $
              -
              
              $
              (1,979
              )
              $
              (8,476
              )Investing
                  activitiesProperty,
                  plant and equipment expenditures
              
              $
              1,069
              
              $
              3,002
              
              $
              -
              
              $
              4,071
 
 **Nine
                      months ended September 30, 2004**
                    **(Restated
                      - Note 3(b))****Montana
                      Tunnels**
                  
                  **Black
                      Fox**
                  
                  **Corporate
                      and Other**
                  
                  **Total**Revenue
                      from sale of minerals
                  
                  $
                  25,542
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  25,542Direct
                      operating costs
                  
                  
                  39,815
                  
                  
                  -
                  
                  
                  -
                  
                  
                  39,815Depreciation
                      and amortization
                  
                  
                  1,823
                  
                  
                  -
                  
                  
                  84
                  
                  
                  1,907General
                      and administrative expenses
                  
                  
                  -
                  
                  
                  -
                  
                  
                  4,325
                  
                  
                  4,325Stock-based
                      compensation
                  
                  
                  -
                  
                  
                  -
                  
                  
                  487
                  
                  
                  487Accretion
                      expense
                  
                  
                  560
                  
                  
                  -
                  
                  
                  -
                  
                  
                  560Exploration
                      and business development
                  
                  
                  -
                  
                  
                  -
                  
                  
                  774
                  
                  
                  77442,198
                  
                  
                  -
                  
                  
                  5,670
                  
                  
                  47,868Operating
                      income (loss)
                  
                  
                  (16,656
                  )
                  
                  -
                  
                  
                  (5,670
                  )
                  
                  (22,326
                  )Interest
                      income
                  
                  
                  -
                  
                  
                  -
                  
                  
                  261
                  
                  
                  261Interest
                      expense
                  
                  
                  (113
                  )
                  
                  -
                  
                  
                  -
                  
                  
                  (113
                  )Foreign
                      exchange loss and other
                  
                  
                  (108
                  )
                  
                  -
                  
                  
                  (459
                  )
                  
                  (567
                  )Loss
                      from continuing operations
                  
                  $
                  (16,877
                  )
                  $
                  -
                  
                  $
                  (5,868
                  )
                  $
                  (22,745
                  )Investing
                      activitiesProperty,
                      plant and equipment expenditures
                  
                  $
                  2,171
                  
                  $
                  9,301
                  
                  $
                  321
                  
                  $
                  11,793
 
 18
 **APOLLO
              GOLD CORPORATION**
 **Notes
                to the Consolidated Financial Statements**
 **Nine
                month period ended September 30, 2005**
 **(Stated
                in United States Dollars; tabular amounts in thousands, except for
                share and per
                share amounts)**
 **(Unaudited)**
 **9.**
                **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 United States Securities and Exchange
        Commission for the three and nine month periods ended September 30, 2005
        and
        2004.
  Material
        variances between financial statement items under Canadian GAAP and the amounts
        determined under U.S. GAAP are as follows:
  **Consolidated
        Balance Sheet**
 September
        30, 2005
  **Current
                  Assets Held For Sale**
              
              **Property,
                  Plant and Equipment**
              
              **Deferred
                  Financing**
              
              **Non-Current
                  Assets Held For Sale**
              
              **Convertible
                  Debentures**
              
              **Share
                  Capital**
              
              **Equity
                  Component of Convertible Debentures**
              
              **Contributed
                  Surplus**
              
              **Deficit**As
                  at September 30, 2005, Canadian GAAP
              
              $
              9,089
              
              $
              39,979
              
              $
              1,145
              
              $
              23,074
              
              $
              6,368
              
              $
              148,079
              
              $
              1,809
              
              $
              10,489
              
              $
              (124,988
              )Impairment
                  of property, plant and equipment and change in depreciation
                  (b)
              
              
              -
              
              
              (4,416
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,416
              )Black
                  Fox developmentcosts
                  (c)
              
              
              -
              
              
              (18,407
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (18,407
              )Convertible
                  debenture (d)(i)
              
              
              -
              
              
              -
              
              
              258
              
              
              -
              
              
              1,675
              
              
              (1
              )
              
              (1,809
              )
              
              123
              
              
              (270
              )Convertible
                  debenture (d)(ii)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              20,675
              
              
              (20,675
              )Flow-through
                  common shares (f)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (238
              )
              
              -
              
              
              -
              
              
              238Commencement
                  of operations at Standard Mine (h)
              
              
              311
              
              
              -
              
              
              -
              
              
              (1,151
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (840
              )As
                  at September 30, 2005, U.S. GAAP
              
              $
              9,400
              
              $
              17,156
              
              $
              1,403
              
              $
              21,923
              
              $
              8,043
              
              $
              147,840
              
              $
              -
              
              $
              31,287
              
              $
              (169,358
              )
  **Consolidated
        Balance Sheet**
 December 31,
        2004
 (Restated
        - Note 3(b))
  **Property,
                  Plant and Equipment**
              
              **Deferred
                  Financing**
              
              **Non-Current
                  Assets Held For Sale**
              
              **Convertible
                  Debentures**
              
              **Share
                  Capital**
              
              **Equity
                  Component of Convertible Debentures**
              
              **Contributed
                  Surplus**
              
              **Deficit**As
                  at December 31, 2004,Canadian GAAP
              
              $
              37,599
              
              $
              901
              
              $
              32,104
              
              $
              5,538
              
              $
              141,795
              
              $
              1,815
              
              $
              9,627
              
              $
              (107,028
              )Impairment
                  of property, plant and equipment and change in depreciation
                  (b)
              
              
              (4,848
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (4,848
              )Black
                  Fox developmentcosts
                  (c)
              
              
              (14,048
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (14,048
              )Convertible
                  debenture (d)(i)
              
              
              -
              
              
              350
              
              
              -
              
              
              2,321
              
              
              -
              
              
              (1,815
              )
              
              123
              
              
              (279
              )Convertible
                  debenture (d)(ii)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              20,675
              
              
              (20,675
              )Commodity
                  contracts (e)
              
              
              -
              
              
              -
              
              
              (1,340
              )
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,340
              )Flow-through
                  common shares (f)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (238
              )
              
              -
              
              
              -
              
              
              238As
                  at December 31, 2004, U.S. GAAP
              
              $
              18,703
              
              $
              1,251
              
              $
              30,764
              
              $
              7,859
              
              $
              141,557
              
              $
              -
              
              $
              30,425
              
              $
              (147,980
              )
  19
 **APOLLO
            GOLD CORPORATION**
 **Notes
              to the Consolidated Financial Statements**
 **Nine
              month period ended September 30, 2005**
 **(Stated
              in United States Dollars; tabular amounts in thousands, except for
              share and per
              share amounts)**
 **(Unaudited)**
 **9.**
              **DIFFERENCES
                  BETWEEN CANADIAN AND U.S. GAAP
                  (Continued)**
  Under
        U.S. GAAP, the net loss and net loss per share would be adjusted as
        follows:
  **Three
                  months ended**
                **September 30,****2005**
              
              **2004**(Restated
                  - Notes
                3(b)
                  and 9(e))Loss
                  from continuing operations for the period based on Canadian
                  GAAP
              
              $
              (3,614
              )
              $
              (8,476
              )Change
                  in depreciation of property, plant and equipment (b)
              
              
              134
              
              
              184Black
                  Fox development costs (c)
              
              
              (871
              )
              
              (2,813
              )Convertible
                  debenture ((d)(i))
              
              
              (416
              )
              
              -Loss
                  from continuing operations for the period based on U.S.
                  GAAP
              
              
              (4,767
              )
              
              (11,105
              )Loss
                  from discontinued operations for the period based on Canadian
                  GAAP
              
              
              (3,599
              )
              
              (2,753
              )Commodity
                  contracts loss (e)
              
              
              -
              
              
              1,005Standard
                  Mine development costs (h)
              
              
              (526
              )
              
              -Loss
                  from discontinued operations for period based on US GAAP
              
              
              (4,125
              )
              
              (1,748
              )Net
                  loss for the period based on U.S. GAAP
              
              $
              (8,892
              )
              $
              (12,853
              )Comprehensive
                  loss
              
              $
              (8,892
              )
              $
              (12,853
              )Basic
                  and diluted loss per share in accordance with U.S. GAAP:Continuing
                  operations
              
              $
              (0.04
              )
              $
              (0.14
              )Discontinued
                  operations
              
              
              (0.04
              )
              
              (0.02
              )Net
                  loss per share - U.S. GAAP basic and diluted
              
              $
              (0.08
              )
              $
              (0.16
              )
 
 20
 **APOLLO
            GOLD CORPORATION**
 **Notes
              to the Consolidated Financial Statements**
 **Nine
              month period ended September 30, 2005**
 **(Stated
              in United States Dollars; tabular amounts in thousands, except for
              share and per
              share amounts)**
 **(Unaudited)**
 **9.**
                      **DIFFERENCES
                          BETWEEN CANADIAN AND U.S. GAAP
                          (Continued)**
 
 **Nine
                  months ended**
                **September
                   30,****2005**
              
              **2004**(Restated
                  - Notes
                3(b)
                  and 9(e))Loss
                  from continuing operations for the period based on Canadian
                  GAAP
              
              $
              (12,006
              )
              $
              (22,745
              )Cumulative
                  effect of change in accounting policy (a)
              
              
              -
              
              
              (1,508
              )Change
                  in depreciation of property, plant and equipment (b)
              
              
              432
              
              
              481Black
                  Fox development costs (c)
              
              
              (4,359
              )
              
              (9,063
              )Convertible
                  debenture ((d)(i))
              
              
              9
              
              
              -Loss
                  from continuing operations for the period based on U.S.
                  GAAP
              
              
              (15,924
              )
              
              (32,835
              )Loss
                  from discontinued operations for the period based on Canadian
                  GAAP
              
              
              (5,954
              )
              
              (2,521
              )Commodity
                  contracts loss (e)
              
              
              1,340
              
              
              3,015Standard
                  Mine development costs (h)
              
              
              (840
              )
              
              -(Loss)
                  income from discontinued operations for the period based on U.S.
                  GAAP
              
              
              (5,454
              )
              
              494Net
                  loss for the period based on U.S. GAAP
              
              $
              (21,378
              )
              $
              (32,341
              )Comprehensive
                  loss
              
              $
              (21,378
              )
              $
              (32,341
              )Basic
                  and diluted loss (income) per share in accordance with U.S.
                  GAAP:Continuing
                  operations
              
              $
              (0.16
              )
              $
              (0.42
              )Discontinued
                  operations
              
              
              (0.05
              )
              
              0.00Net
                  loss per share - U.S. GAAP basic and diluted
              
              $
              (0.21
              )
              $
              (0.42
              )
 
 21
 **APOLLO
              GOLD CORPORATION**
 **Notes
                to the Consolidated Financial Statements**
 **Nine
                month period ended September 30, 2005**
 **(Stated
                in United States Dollars; tabular amounts in thousands, except for
                share and per
                share amounts)**
 **(Unaudited)**
 **9.**
                **DIFFERENCES
                    BETWEEN CANADIAN AND U.S. GAAP
                    (Continued)**
 
 *(a)*
              Stock-based
                  compensation
  Under
        Canadian GAAP, effective January 1, 2004, the Company adopted the amended
        recommendations of the Canadian Institute of Chartered Accountants (CICA)
        Handbook Section 3870. Under U.S. GAAP, effective January 1, 2004, the Company
        adopted the modified prospective method of accounting for stock-based
        compensation recommended in Statement of Financial Accounting Standards (“SFAS”)
        148, *Accounting
        for Stock-Based Compensation - Transition and Disclosure.* Prior
        to
        January 1, 2004, the Company measured its employee stock-based awards
        using
        the intrinsic value method prescribed by APB No. 25, *Accounting
        for Stock Issued to Employees* .
  *(b)*
              *Impairment
                  of property, plant and equipment*
  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 proven and probable reserves. Accordingly,
        for
        U.S. GAAP purposes, an impairment of property, plant and equipment was recorded
        and an adjustment to the related depreciation expense has been recorded.
  *(c)*
              *Black
                  Fox Project*
  Under
        Canadian GAAP, mining development costs at the Black Fox Project have been
        capitalized. Under U.S. GAAP, these expenditures are expensed as incurred,
        pending completion of a feasibility study. Accordingly, for U.S. GAAP purposes,
        a reduction in property, plant and equipment of $18.4 million has been recorded
        as at September 30, 2005.
  *(d)*
              *Convertible
                  debenture*
  (i)
              Under
                  Canadian GAAP, the convertible debentures issued in November 2004
                  were
                  recorded as a compound financial instrument including detachable
                  note
                  warrants. Under U.S. GAAP, the detachable note warrant is similarly
                  treated as an equity instrument with the remainder of the convertible
                  debentures treated as a liability. Further, under U.S. GAAP, the
                  beneficial conversion feature determined using the effective conversion
                  price based on the proceeds allocated to the convertible debenture
                  in
                  accordance with EITF 00-27, “Application of Issue No. 98-5 to Certain
                  Convertible Instruments”, is allocated to contributed surplus. This
                  discount on the debenture is recognized as additional interest
                  expense
                  immediately as the debt is convertible at the date of issuance.
                  Canadian
                  GAAP does not require the recognition of any beneficial conversion
                  feature.
  (ii)
              Under
                  Canadian GAAP, the convertible debentures were recorded as an equity
                  instrument on issuance in March 2002. Under U.S. GAAP, on issuance,
                  the
                  convertible debenture would have been recorded as a liability and
                  reclassified to equity only upon conversion. Further, under U.S.
                  GAAP, the
                  beneficial conversion feature represented by the excess of the
                  fair value
                  of the shares and warrants issuable on conversion of the debenture,
                  measured on the commitment
  22
 **APOLLO
              GOLD CORPORATION**
 **Notes
                to the Consolidated Financial Statements**
 **Nine
                month period ended September 30, 2005**
 **(Stated
                in United States Dollars; tabular amounts in thousands, except for
                share and per
                share amounts)**
 **(Unaudited)**
 **9.**
                **DIFFERENCES
                    BETWEEN CANADIAN AND U.S. GAAP
                    (Continued)**
  *(d)*  *Convertible
        debenture (Continued)*
 
 date,
        over the amount of the proceeds to be allocated to the common shares and
        warrants upon conversion, would be allocated to contributed surplus. This
        results in a discount on the debenture that is recognized as additional interest
        expense over the term of the debenture and any unamortized balance is expensed
        immediately upon conversion of the debenture. Accordingly, for U.S. GAAP
        purposes, the Company has recognized a beneficial conversion feature and
        debenture issuance costs of $20.7 million in the year ended December 31,
        2002. Canadian GAAP does not require the recognition of any beneficial
        conversion feature.
  *(e)*
              *Non-current
                  assets held for sale (Commodity
                  contracts)*
  Prior
        to
        January 1, 2004 under U.S. GAAP unrealized gains and losses on the
        put and
        call option contracts were recorded in the statement of operations. As of
        January 1, 2004, the Company adopted the provisions of Accounting
        Guideline
        13 and unrealized gains and losses on these contracts are now recorded in
        the
        statement of operations under Canadian GAAP. As described in Note 7,
        quarterly losses for 2004 have been restated to reflect the correct accounting
        treatment for these commodity contracts in accordance with Canadian GAAP.
        Similarly, under U.S. GAAP the Company incorrectly accounted for the unrealized
        loss on cash flow hedges as a component of comprehensive loss, rather than
        net
        loss for the period.
  *(f)*
              *Flow-through
                  common shares*
  Under
        Canadian income tax legislation, a company is permitted to issue shares whereby
        the company agrees to incur qualifying expenditures and renounce the related
        income tax deductions to the investors. The Company has accounted for the
        issue
        of flow-through shares using the deferral method in accordance with Canadian
        GAAP. At the time of issue, the funds received are recorded as share capital.
        For U.S. GAAP, the premium over (discount from) market value is credited
        (debited) to other liabilities (deferred costs) and included in income as
        the
        qualifying expenditures are made.
  Also,
        notwithstanding whether there is a specific requirement to segregate the
        funds,
        the flow-through funds which are unexpended at the consolidated balance sheet
        dates are considered to be restricted and are not considered to be cash or
        cash
        equivalents under U.S. GAAP. As at September 30, 2005, unexpended flow-through
        funds were $0.1 million (December 31, 2004 - $0.6
        million).
  *(g)*
              *Comprehensive
                  income*
  SFAS
        No.
        130, *Reporting
        Comprehensive Income* (“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.
  23
 **APOLLO
              GOLD CORPORATION**
 **Notes
                to the Consolidated Financial Statements**
 **Nine
                month period ended September 30, 2005**
 **(Stated
                in United States Dollars; tabular amounts in thousands, except for
                share and per
                share amounts)**
 **(Unaudited)**
 **9.**
                **DIFFERENCES
                    BETWEEN CANADIAN AND U.S. GAAP
                    (Continued)**
  *(h)*
              *Commencement
                  of operations at Standard Mine*
  According
        to Canadian GAAP the Standard Mine was not in commercial production until
        June
        1, 2005. Under U.S. GAAP, commercial production begins when construction
        is
        complete and saleable minerals are produced which was March 1, 2005. Accordingly
        for U.S. GAAP purposes an addition of current assets held for sale of $0.3
        million, a reduction in non-current assets held for sale of $1.1 million,
        and an
        increase in net loss of $0.8 million has been recorded at September 30,
        2005.
  **10.**
              **SUBSEQUENT
                  EVENTS**
 *(a)*
                *Signed
                    Sales Agreement for Sale of Nevada Assets, related Private Placement
                    and
                    Advance*
  On
        October 17, 2005 a binding stock purchase agreement (the “Agreement”) was signed
        with Jipangu Inc. for the sale of the Nevada Assets for $14 million (the
“Mines
        Sale”), subject to certain conditions. In addition, Apollo and Jipangu have
        entered into a subscription agreement for a $3.5 million private placement
        under
        which Jipangu would purchase up to 11,650,000 units of Apollo priced at Cdn$0.35
        per unit, with each unit consisting of one common share of Apollo and 0.17167
        of
        a warrant (for a total of up to 2,000,000 warrants), with each whole warrant
        exercisable for two years at Cdn$0.39 for one common share. If the private
        placement were completed and the warrants were exercised, Jipangu would own
        in
        the aggregate 19.7% of Apollo's common shares based on 106,556,451 common
        shares
        outstanding as of October 17, 2005.
  The
        Company expects that the Mines Sale will close on November 18, 2005. Pursuant
        to the Agreement, if the Mines Sale does not close by December 1, 2005,
        either Apollo or Jipangu may terminate the Agreement, provided that the
        terminating party has not breached the Agreement in a manner that has prevented
        the closing. The $3.5 million private placement is conditional upon the
        completion of the Mines Sale, and would not close until the 61st day after
        the
        closing of the Mines Sale. If the Mines Sale is not completed, Jipangu would
        have the option to invest up to $3.5 million in a private placement under
        certain circumstances.
  Also,
        on
        October 17, 2005, pursuant to the Agreement, Jipangu advanced Apollo $2.5
        million and Apollo issued Jipangu a $2.5 million promissory note due
        June 1, 2006. The note is non-interest bearing through December 1,
        2005, after which the note will bear interest at 7.3% per annum. At the closing
        of the Mines Sale, the $2.5 million advance would be credited toward the
        $14
        million purchase price in full satisfaction of the indebtedness evidenced
        by the
        note.
  *(b)*
              *Temporary
                  Suspension of Mining at Montana
                  Tunnels*
  In
        October 2005, due to increased wall activity in the eastern side of the open
        pit, the Company decided to temporarily suspend mining at Montana
        Tunnels. Although access to the pit is still possible, it is not within
        acceptable Apollo safety standards and the Company has commenced,
        with
        the assistance of outside consultants,a technical review of pit access
        options and safety issues affecting the mine. In the meantime, the Company
        plans
        to continue milling low grade ores from stockpile material and is currently
        unable to predict the effect on its financial results. An estimate of the
        financial effect of this event cannot be made until the technical review
        is
        completed.
  24
  **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 9 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.
  The
        Montana Tunnels results of operations have been restated for all periods
        presented December 31, 2004 and earlier to reflect a change in accounting
        policy
        with respect to stripping costs.
  Additionally,
        certain of the comparative figures have been reclassified to conform with
        the
        current period presentation. In particular, the results of operations of
        the
        Florida Canyon Mine and the Standard Mine for the three and nine months ended
        September 30, 2004 have been classified as discontinued operations and therefore
        the table below reflects Montana Tunnels statistics only.
  **RECONCILIATION
        OF CASH OPERATING AND TOTAL PRODUCTION COSTS PER OUNCE**
  **($
                  in thousands)**
              
              **Three
                  months ended**
                **September
                  30,**
              
              **Nine
                  months ended**
                **September
                  30,****2005**
              
              **2004**
              
              **2005**
              
              **2004**(as
                  restated)
              
              
              
              (as
                  restated)Gold
                  ounces sold
              
              
              14,104
              
              
              4,967
              
              
              39,073
              
              
              21,653Direct
                  operating costs
              
              $
              14,162
              
              $
              12,627
              
              $
              40,273
              
              $
              39,815Less:Mining
                  taxes, royalty expenses
              
              
              345
              
              
              212
              
              
              932
              
              
              685By-product
                  credits
              
              
              6,929
              
              
              5,351
              
              
              19,280
              
              
              16,918Cash
                  operating cost
              
              
              6,888
              
              
              7,064
              
              
              20,061
              
              
              22,212Cash
                  operating cost per ounce
              
              **$**
              **488**
              
              **$**
              **1,422**
              
              **$**
              **513**
              
              **$**
              **1,026**Cash
                  operating costs
              
              
              6,888
              
              
              7,064
              
              
              20,061
              
              
              22,212Add:Mining
                  taxes, royalty expenses
              
              
              345
              
              
              212
              
              
              932
              
              
              685Total
                  cash costs
              
              
              7,233
              
              
              7,276
              
              
              20,993
              
              
              22,897Total
                  cash cost per ounce
              
              **$**
              **513**
              
              **$**
              **1,465**
              
              **$**
              **537**
              
              **$**
              **1,057**Total
                  cash costs
              
              
              7,233
              
              
              7,276
              
              
              20,993
              
              
              22,897Add:Depreciation
                  & amortization (operations only)
              
              
              615
              
              
              646
              
              
              1,885
              
              
              1,823Total
                  production costs
              
              
              7,848
              
              
              7,922
              
              
              22,878
              
              
              24,720Total
                  production cost per ounce
              
              **$**
              **556**
              
              **$**
              **1,595**
              
              **$**
              **586**
              
              **$**
              **1,142**
 
 We
        have
        included total cash cost and cash operating cost information to provide
        investors with information about the cost structure of our mining operation.
        We
        use this information for the same purpose and for monitoring the performance
        of
        our operation. This information differs from measures of performance determined
        in accordance with Canadian and U.S. GAAP and should not be considered in
        isolation or as a substitute for measures of performance prepared in accordance
        with Canadian and U.S. GAAP. These measures are not necessarily indicative
        of
        operating profit or cash flow from operations as determined under GAAP and
        may
        not be comparable to similarly titled measures of other companies.
  25
  The
        following presents a discussion of the financial condition and results of
        operations of the Company for the three and nine months ended September 30,
        2005
        and September 30, 2004, respectively.
  **BACKGROUND
        AND RECENT DEVELOPMENTS**
  We
        are
        principally engaged in the exploration, development and mining of gold. We
        own
        Black Fox, a development property located east of Timmins, Ontario, Canada.
        We
        also own a concession and the right to acquire additional concessions to
        the
        Huizopa exploration property in Mexico. In addition, we own and operate the
        Montana Tunnels Mine, a gold, silver, lead and zinc open pit mine, located
        near
        Helena, Montana and the Diamond Hill Mine, currently under care and maintenance,
        also located in the State of Montana.
  **Recent
        Events.**
  **Nevada
        Assets**
  On
        October 17, 2005, we entered into a Stock Purchase Agreement (the “Agreement”)
        with Jipangu Inc. (“Jipangu”), a Delaware corporation and wholly owned
        subsidiary of Jipangu International Inc., a Japanese corporation (“Jipangu
        Parent”), for the sale of all of the issued and outstanding stock of Florida
        Canyon Mining, Inc., Standard Gold Mining, Inc. and Apollo Gold Exploration,
        Inc. for $14.0 million (the “Mines Sale”), subject to certain conditions. In
        addition, we entered into a Subscription Agreement with Jipangu for a $3.5
        million private placement (the “Private Placement”), pursuant to which Jipangu
        would purchase up to 11,650,000 units of Apollo priced at Cdn$0.35 per unit,
        with each unit consisting of one common share of Apollo and 0.17167 of a
        warrant
        (for a total of up to 2,000,000 warrants), with each whole warrant exercisable
        for two years at Cdn$0.39 for one common share of Apollo.
  If
        the
        Private Placement were completed and the warrants were exercised, Jipangu
        would
        own in the aggregate 19.7% of Apollo's common shares based on 106,556,451
        common
        shares outstanding as of November 7, 2005.
  The
        closing of the Mines Sale under the Agreement is subject to certain conditions
        and we expect that the Mines Sale will close on November 18, 2005. If the
        Mines
        Sale does not close by December 1, 2005, either Apollo or Jipangu may terminate
        the Agreement, provided that the terminating party has not breached the
        agreement in a manner that has prevented the closing. The Private Placement
        is
        conditional upon the completion of the Mines Sale, and would not close until
        the
        61st day after the closing of the Mines Sale. If the Mines Sale is not
        completed, Jipangu would have the option to invest up to $3.5 million in
        a
        private placement under certain circumstances.
  **Black
        Fox**
  As
        a
        result of the contemplated Mines Sale, we are focusing and concentrating
        our
        resources on the development of the Black Fox project which we believe is
        the
        future of the Company. An additional 30 underground diamond drill holes were
        completed during the third quarter 2005 bringing the total number of underground
        holes to date to 335, with the total number of drill holes completed, including
        surface holes, to 784 at September 30, 2005. We expect to complete the current
        drilling program in November 2005 and the Company has commenced work on updating
        our reserve calculations at Black Fox, which will be published first quarter
        2006.
  **Montana
        Tunnels**
  The
        Montana Tunnels mine was acquired by Apollo in the second quarter 2002 and
        following a four month stripping program of waste rock removal, the mine
        commenced limited production of ore in October 2002, with full commercial
        production recommencing in April 2003. Since that time the mine has experienced
        pit wall problems that have resulted in periodic disruption of production
        and
        several significant changes to mining plans, including in late 2003 the
        commencement of the phase two stripping program to remove 25 million
        tons
        of material that slid off the southwest pit wall. This strip program was
        completed at the end of 2004 and the mine was then expectedto have a 3 year mine life before a further pit expansion program
        was required. The result of these interruptions to normal operations has
        meant
        that the mine has failed to meet production expectations or forecasted cash
        costs per ounce of gold since recommencing operation in 2003. We monitor
        the
        wall movement on a daily basis and the movement of the wall above the haul
        ramp,
        although steady throughout 2004 and the first quarter of 2005, was consistent
        with the type of movement experienced historically and the Company believes
        it
        is manageable.
  26
  During
        May and June 2005 the mine again encountered production problems caused by
        the
        deterioration of the haul ramp leading to periodic ramp closures as a result
        of
        increased wall activity caused by excessive continuous rainfall, with June
        2005
        recorded as the third wettest month on record for Jefferson County. In June
        2005
        the mine plan was again revised to allow a two week shutdown to allow the
        mine
        to unload some upper slopes of the open pit and improve the haulage ramp.
        The
        two weeks of remediation work was carried out in July 2005, as planned, and
        production at the mine improved during August and September 2005. However
        during
        October there was again increased wall activity on the eastern side of the
        open
        pit above the haul ramp. Although the pit is still accessible, we decided
        to
        temporarily suspend mining on October 21, 2005 to undertake,
        with
        the assistance of outside consultants,a technical review of pit access
        options and safety issues affecting the mine. In the meantime, we plan to
        continue milling low grade ores from stockpile material and are currently
        unable
        to predict the effect on our financial results.
  **Summary
        of Production Results and Total Cash Costs per Ounce from Continuing
        Operations**
  **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:
  **Nine
                  months ended**
                **September
                  30,**
                **2005**
              
              **Year
                  Ended December 31,**
                **2004**
              
              **Year
                  Ended December 31,**
                **2003**Production:Gold
                  (ounces)
              
              
              39,073
              
              
              33,743
              
              
              44,124Silver
                  (ounces)
              
              
              421,479
              
              
              970,751
              
              
              411,176Lead
                  (pounds)
              
              
              9,273,121
              
              
              10,064,265
              
              
              10,843,184Zinc
                  (pounds)
              
              
              19,800,021
              
              
              26,222,805
              
              
              21,792,452Average
                  metal prices:Gold
                  - London bullion mkt. ($/ounce)
              
              $
              431
              
              $
              409
              
              $
              364Silver
                  - London bullion mkt. ($/ounce)
              
              $
              7.06
              
              $
              6.66
              
              $
              4.88Lead
                  - LME ($/pound)
              
              $
              0.43
              
              $
              0.40
              
              $
              0.23Zinc
                  - LME ($/pound)
              
              $
              0.59
              
              $
              0.48
              
              $
              0.38
 
 For
        the
        three months ended September 30, 2005, gold production from continuing
        operations increased 184% to 14,104 ounces, zinc production increased 98%
        to
        7,400,000 lbs, and lead production increased 61% to 3,389,000 lbs from 4,967
        ounces of gold, 3,738,000 lbs of zinc, and 2,110,000 lbs of lead for the
        three
        months ended September 30, 2004, respectively. For the nine months ended
        September 30, 2005, gold production from continuing operations increased
        80% to
        39,073 ounces, zinc production increased 6% to 19,800,000 lbs, and lead
        production increased 33% to 9,273,000 lbs from 21,653 ounces of gold, 18,753,000
        lbs of zinc, and 6,978,000 lbs of lead for the nine months ended September
        30,
        2004, respectively.
  27
  For
        the
        three months ended September 30, 2005, total cash cost per ounce of gold
        from
        continuing operations decreased 65% to $513 from $1,465 for the three months
        ended September 30, 2004. Production in 2004 was significantly reduced
        due
        to a major stripping program and the processing of lower grade and below
        reserve
        grade ores. For the nine months ended September 30, 2005, total cash cost
        per
        ounce of gold from continuing operations decreased 49% to $537 from $1,057
        for
        the nine months ended September 30, 2004. The improvement in cash cost per
        ounce
        is due to higher production of metals as a result of better grades of ore
        and
        higher prices of zinc and lead. However, the total cash cost per ounce still
        remained above the selling price per ounce of gold primarily due to poor
        mining
        performance, resulting from ramp access and pit wall problems.
  **MATERIAL
        CHANGES IN RESULTS OF OPERATIONS**
  **Three
        Months Ended September 30, 2005 Compared to the Three Months Ended
        September 30, 2004**
  **Revenue
        from the Sale of Minerals from Continuing Operations.**
  Revenues
        from continuing operations for the three months ended September 30,
        2005
        increased 81% to $13.4 million **** from
        $7.4
        million for the same period in 2004. Revenues from silver, zinc and lead
        for the
        three months ended September 30, 2005 increased 28% to $6.9 million from
        $5.4
        million for the three months ended September 30, 2004. Revenue from gold
        sales
        for the three months ended September 30, 2005 were $6.4 million, (48% of
        total
        revenue) compared to $2.0 million (28% of the total revenue) for the same
        period
        2004. Revenue from zinc at $4.7 million for the three months ended September
        30,
        2005 accounted for 35% of total revenues. The average price received for
        gold
        per ounce for the three months ended September 30, 2005 increased 11% to
        $455
        from $411 for the three months ended September 30, 2004. The increase in
        revenues is due to increased production and higher prices of zinc and
        lead.
  **Continuing
        Operations - Montana Tunnels.**
  The
        following presents the key statistics for the Montana Tunnels operation for
        the
        three months ended September 30, 2005 and 2004, respectively:
  **Three
                  months ended**
                **September 30,****2005**
              
              **2004**(as
                  restated)Tons
                  mined
              
              
              4,217,617
              
              
              9,789,823Tons
                  milled
              
              
              1,299,610
              
              
              1,514,690Gold
                  grade oz/ton
              
              
              0.0150
              
              
              0.0059Zinc
                  grade %
              
              
              0.42
              
              
              0.20Strip
                  ratio
              
              
              3.2:1
              
              
              6.5:1Production
                  payable:Gold
                  ounces
              
              
              14,104
              
              
              4,967Silver
                  ounces
              
              
              129,736
              
              
              425,351Lead
                  pounds
              
              
              3,389,443
              
              
              2,110,786Zinc
                  pounds
              
              
              7,401,636
              
              
              3,738,427Total
                  cash costs per ounce
              
              $
              513
              
              $
              1,465Total
                  production costs per ounce
              
              $
              556
              
              $
              1,595Total
                  revenue ($ millions)
              
              $
              13.4
              
              $
              7.4Capital
                  expenditures ($ millions)
              
              $
              0.1
              
              $
              1.1
 
 Due
        to
        the lower strip ratio required, the total mined tonnage during the three
        months
        ended September 30, 2005 was 4,217,617 tons compared to 9,789,823 tons
        mined in the same period of 2004, a reduction of 57%. Of the total mined
        for the
        three months ended September 30, 2005, 1,299,610 tons were
        ore,
        resulting in a strip ratio of 3.2:1 for the quarter, which was higher than
        expected for the three months ended September 30, 2005, but lower
        than the
        strip ratio for the three months ended September 30, 2004 of
        6.5:1.
  28
  The
        improvement in the third quarter 2005, compared to the third quarter 2004,
        in
        production and total cash cost per ounce is a result of higher grades of
        ore,
        particularly gold (0.0150 oz/ton compared to 0.0059 oz/ton) and zinc (0.42%
        compared to 0.20%), the combined revenues of which account for 83% of total
        revenues. This improvement in revenue was partially offset by increased direct
        operating costs.
  **Operating
        Expenses.**
  *Direct
        Operating Costs.* Direct
        operating costs, which includes mining costs, processing costs, and smelting
        and
        refining charges, for the three months ended September 30, 2005 increased
        13% to
        $14.2 million from $12.6 million for the three months ended September 30,
        2004,
        although there was a decrease in mined tons of 57% to 4,217,617 tons from
        9,789,823 tons for the three months ended September 30, 2004. The mining
        cost
        per ton for the three months ended September 30, 2005 was $1.54 compared
        to
        $0.66 for the three months ended September 30, 2004. The two primary reasons
        for
        the increase in mining costs are: (i) in 2004 the majority of the material
        mined
        was waste from the upper benches of the pit requiring shorter uphill haul
        distances and therefore better efficiencies when compared to 2005,
        where mining was mainly from the pit bottom, and (ii) the significant increases
        in the prices of our mining consumables, such as diesel and tires, both of
        which
        have increased by over 100% since September 30, 2004. In addition to mining
        costs, the smelter charges for the three months ended September 30, 2005
        increased 103% to $3,027,000 from $1,489,000 for the three months ended
        September 30, 2004, primarily due to the increased mine production of lead
        and
        zinc concentrates being processed by the smelter, along with a higher smelting
        charge per ton of concentrate due to the increase in the price of lead and
        zinc.
        Our smelting contract has a price participation clause which provides that
        as
        the prices of lead and zinc increase the benefit gained by the mine is shared
        with the smelter and vice-versa. The average price of zinc for the three
        months
        ended September 30, 2005 was $0.59/lb compared to $0.48/lb for the three
        months
        ended September 30, 2004.
  *Depreciation
        and Amortization.*  Depreciation
        and amortization expenses were $0.7 million and $0.7 million for the three
        months ended September 30, 2005 and 2004, respectively.
  *General
        and Administrative Expenses.* General
        and administrative expenses were $0.9 million and $1.1 million for the three
        months ended September 30, 2005 and 2004, respectively.
  *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. Share-based compensation was $171,000 and $388,000
        for the three months ended September 30, 2005 and 2004,
        respectively.
  *Accretion
        Expense.* Accrued
        accretion expense was $242,000 compared to $479,000 for the three months
        ended
        September 30, 2005 and 2004, 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 approximately $0.2 million and $0.5 million
        for the three months ended September 30, 2005 and 2004, respectively. This
        decrease in expenditures is due to decreased exploration activities at our
        Huizopa property in Mexico.
  *Total
        Operating Expenses* .
        As a
        result of these expense components, our total operating expenses increased
        3% to
        $16.3 million for the three months ended September 30, 2005 from $15.8 million
        for the three months ended September 30, 2004.
  29
  *Interest
        Income and Interest Expense.* We
        realized interest income of $105,000 during the three months ended September
        30,
        2005 and interest expense of $747,000 in the same period compared to $10,000
        in
        interest income and $30,000 in interest expense during the three months ended
        September 30, 2004. The interest income increase is partially due to increased
        income earned on reclamation bonding deposits. The increase in interest expense
        is due to accretion on the convertible debentures issued in the fourth quarter
        of 2004.
  *Foreign
        Exchange Gain (Loss).* There
        was
        a foreign exchange gain of $5,000 for the three months ended September 30,
        2005
        compared to a $79,000 loss during the three months ended September 30,
        2004
        from cash balances held in Canadian dollars. Apollo utilizes United States
        dollars as its functional and reporting currency.
  **Loss
        from Continuing Operations.**
  As
        a
        result of the foregoing, the Company incurred a loss from continuing operations
        of $3.6 million, or $0.03 per share, for the three months ended September
        30,
        2005, as compared to a loss of $8.5 million, or $0.11 per share, for the
        three
        months ended September 30, 2004.
  **Loss
        from Discontinued Operations.**
  During
        the second quarter, the Company adopted a plan to dispose of its Nevada Assets.
        For the three months ended September 30, 2005, we recorded an impairment
        of $3.9
        million related to the Nevada Assets. This component, when added to the results
        from the discontinued operations means that the Company incurred a total
        loss
        for the three months ended September 30, 2005 of $3.6 million,
        or
        $0.03 per share, as compared to a loss of $2.8 million, or $0.03 per
        share, for the three months ended September 30, 2004.
  **Discontinued
        Operations.**
  *Florida
        Canyon.* Florida
        Canyon’s gold production decreased 58% to 6,169 ounces at a total cash cost of
        $409 per ounce for the three months ended September 30, 2005 from 14,820
        ounces
        of gold at a total cash cost of $406 per ounce for the three months ended
        September 30, 2004, primarily due to cessation of mining on March 1,
        2005.
  We
        had
        planned to mine throughout 2005, however, management determined at the end
        of
        February 2005 to focus its personnel and resources on the Standard Mine and
        therefore the decision was taken to temporarily suspend mining activity from
        March 1, 2005 and to continue to produce gold at Florida Canyon by leaching
        down
        the gold contained within the existing pad.
  **Three
                  months ended**
                **September 30,****2005**
              
              **2004**(as
                  restated)Tons
                  mined
              
              
              0
              
              
              4,235,978Gold
                  production - ounces
              
              
              6,169
              
              
              14,820Silver
                  production - ounces
              
              
              3,054
              
              
              12,154Total
                  cash costs per ounce
              
              $
              409
              
              $
              406Total
                  production costs per ounce
              
              $
              409
              
              $
              447Total
                  revenue ($ millions)
              
              $
              2.7
              
              $
              5.0Capital
                  expenditures ($ millions)
              
              $
              0.0
              
              $
              0.7
 
 There
        was
        no net gain or loss for the three months ended September 30, 2005 as compared
        to
        a $646,000 loss for the three months ended September 30, 2004, due to the
        last
        of the Standard Bank put/call commodity contracts being completed in April
        2005.
  30
  *Standard
        Mine.* Standard
        Mine entered into commercial production on June 1, 2005. Loading of ore onto
        the
        heap leach pad continued throughout the third quarter 2005 enabling the
        expansion of the area under leach and therefore improved production of gold.
        Standard Mine produced 8,432 ounces of gold during the three months ended
        September 30, 2005 at a total cash cost of $387 per ounce.
  Following
        are key operating statistics at the Standard Mine for the third quarter of
        2005
        compared to 2004:
  **Three
                  months ended**
                **September 30,****2005**
              
              **2004**Ore
                  mined - tons
              
              
              1,428,103
              
              
              Not
                  in productionWaste
                  mined - tons
              
              
              1,136,718Total
                  tons mined
              
              
              2,564,821Strip
                  ratio
              
              
              0.8:1Grade
                  of gold - ozs/ton
              
              
              0.0151Gold
                  production - ounces
              
              
              8,432Silver
                  production - ounces
              
              
              21,901Total
                  cash costs per ounce
              
              $
              387Total
                  production costs per ounce
              
              $
              387Total
                  revenue ($ millions)
              
              $
              3.9Capital
                  expenditures ($ millions)
              
              $
              0.5
              
              $
              1.9
  During
        the three months ended September 30, 2005, 2,565,000 tons were mined, of
        which
        1,428,000 tons were ore with the balance being waste, resulting in a strip
        ratio
        of 0.8:1. This strip ratio is equal to the average expected for the year
        2005.
        All ore tons were placed on the pad at an average grade of 0.0151 ounces
        per
        ton.
  Capital
        expenditure for the third quarter 2005 was $0.5 million compared to $1.9
        million
        in the third quarter of 2004. This lower expenditure is because the mine
        was
        under construction in 2004.
  **NINE
        MONTHS ENDED SEPTEMBER 30, 2005 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
        30,
        2004**
  **Revenue
        from the Sale of Minerals from Continuing Operations.**
  Revenues
        from continuing operations for the nine months ended September 30, 2005
        increased 42% to $36.3 million from $25.5 million for the same period in
        2004.
        Revenues from silver, zinc and lead for the nine months ended September 30,
        2005
        increased 14% to $19.3 million from $16.9 million for the nine months ended
        September 30, 2004. Revenue from gold sales for the nine months ended September
        30, 2005 were $17.0 million, (47% of total revenue) compared to $8.6 million
        (34% of the total revenue) for the same period 2004. Revenue from zinc at
        $12.3
        million for the nine months ended September 30, 2005 accounted for 34% of
        total
        revenues. The average price received for gold per ounce for the nine months
        ended September 30, 2005 increased 9% to $435 from $398 for the nine months
        ended September 30, 2004. The increase in revenues is primarily due to increased
        production due to higher prices of zinc and lead.
  31
  **Continuing
        Operations - Montana Tunnels** **.**
  The
        following presents the key production statistics for the Montana Tunnels
        operation for the nine months ended September 30, 2005 and 2004,
        respectively.
  **Nine
                    months ended**
                  **September
                    30,****2005**
                
                **2004**(as
                    restated)Tons
                    mined
                
                
                13,606,591
                
                
                27,578,156Tons
                    milled
                
                
                3,965,389
                
                
                3,780,791Production:Gold
                    grade oz/ton
                
                
                0.014
                
                
                0.009Zinc
                    grade %
                
                
                0.36
                
                
                0.38Gold
                    ounces
                
                
                39,073
                
                
                21,653Silver
                    ounces
                
                
                421,479
                
                
                769,020Lead
                    pounds
                
                
                9,273,121
                
                
                6,978,014Zinc
                    pounds
                
                
                19,800,021
                
                
                18,753,013Total
                    cash costs per ounce
                
                $
                537
                
                $
                1,057Total
                    production costs per ounce
                
                $
                586
                
                $
                1,142Total
                    revenue ($ millions)
                
                $
                36.3
                
                $
                25.5Capital
                    expenditures ($ millions)
                
                $
                0.2
                
                $
                2.2
 
 Due
        to
        the lower strip ratio planned, the total mine tonnage moved during the nine
        months ended September 30, 2005, was 13,606,591 tons compared to 27,578,156
        tons mined for the nine months ended September 30, 2004. Of the total
        mined
        in the first nine months of 2005, 4,038,000 were ore giving a strip ratio
        for
        the year-to-date of 2.4:1 which was slightly higher than expected. This compares
        to ore mined in the first nine months of 2004 of 4,076,000 tons for a strip
        ratio of 5.8:1.
  The
        higher total cash costs in 2004 are a result of the implementation of the
        FASB
        recommendation on stripping costs.
  **Operating
        Expenses.**
  *Direct
        Operating Expenses.* Direct
        operating costs, which includes mining costs, processing costs and smelting
        and
        refining charges, for the nine months ended September 30, 2005 increased
        1% to
        $40.3 million from $39.8 million for the nine months ended September 30,
        2004,
        although there was a decrease in mined tonnage of 51% to 13,606,591 tons
        from
        27,578,156 tons for the nine months ended September 30, 2004. These higher
        than
        expected costs were a result of operational problems encountered in the mine
        and
        higher unit costs of operational supplies when compared to 2004. The operational
        problems were weather related problems in the second quarter 2005, resulting
        in
        problems with access to the ramp and lower tons being mined. The
        higher unit costs of operational supplies are a result of the significant
        increase in the cost of consumables such as diesel and tires, both of which
        have
        increased by over 100% during the past twelve months.
  *Depreciation
        and Amortization Expenses.* Depreciation
        and amortization expenses were $2.0 million for the nine months ended September
        30, 2005 as compared to $1.9 million for the same period 2004.
  *General
        and Administrative Expenses.* General
        and administrative expenses were $3.7 million for the nine months ended
        September 30, 2005 as compared to $4.3 million from the first nine months
        ended
        September 30, 2004 primarily due to no management bonuses being paid in 2005.
  *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. Share-based compensation was $0.5 million for
        both
        the nine months ended September 30, 2005 and the same period of
        2004.
  32
  *Accretion
        Expense.* Accrued
        accretion expense was $0.6 million for the nine months ended September 30,
        2005
        compared to $0.6 million for the same period of 2004, due to accrued site
        closure costs at the Montana Tunnels mine.
  *Expenses
        for Exploration and Development* .
        Expenses for exploration and development, consisting of drilling and related
        expenses at our exploration properties, totaled approximately $0.7 million
        and
        $0.8 million for the nine months ended September 30, 2005 and 2004,
        respectively.
  *Total
        Operating Expenses.* As a
        result of these expense components, our operating expenses totaled approximately
        $47.9 million for the nine months ended September 30, 2005 and 2004,
        respectively.
  *Interest
        Income and Interest Expense* .
        Apollo
        realized interest income of $278,000 during the nine months ended September
        30,
        2005 and interest expense of $1,940,000 in the same period compared to $261,000
        in interest income and $113,000 in interest expense during the nine months
        ended
        September 30, 2004. The increase in interest expense is due to accretion
        on the
        convertible debentures issued in the fourth quarter of 2004.
  *Gain
        on Sale of Property, Plant and Equipment.* A $1.3
        million gain on sale of spare mining equipment at Montana Tunnels was realized
        during the first nine months ended September 30, 2005.
  *Foreign
        Exchange Loss.* There
        was a foreign exchange loss of $28,000 for the nine months ended September
        30,
        2005 compared to a $567,000 loss during the nine months ended September 30,
        2004
        from cash balances held in Canadian dollars. Apollo utilizes United States
        dollars as its functional and reporting currency.
  Loss
        from
        Continuing Operations.
  As
        a
        result of the foregoing, the Company incurred a loss from continuing operations
        of $12.0 million, or $0.12 per share, for the nine months ended September
        30,
        2005, as compared to a loss of $22.7 million, or $0.29 per share, for the
        nine
        months ended September 30, 2004.
  Loss
        from
        Discontinued Operations.
  During
        the second quarter, the Company adopted a plan to dispose of its Nevada Assets.
        For the nine months ended September 30, 2005, we recorded a total impairment
        of
        $8.4 million related to the Nevada Assets. This impairment when added to
        the
        results from the discontinued operations meant that the Company incurred
        a total
        loss for the nine months ended September 30, 2005 of $6.0 million, or $0.06
        per
        share, as compared to a loss of $2.5 million, or $0.03 per share, for the
        nine
        months ended September 30, 2004.
  **Discontinued
        Operations.**
  *Florida
        Canyon* *.* At
        Florida Canyon, production of gold decreased by 55% to 24,765 ounces at a
        total
        cash cost of $380 per ounce for the nine months ended September 30, 2005
        from
        55,649 ounces of gold at a total cash cost of $354 per ounce for the nine
        months
        ended September 30, 2004 primarily due to the cessation of mining on March
        1,
        2005. The total cash cost for the nine months ended September 30, 2005 of
        $380
        per ounce includes a non cash charge from leach pad inventory of $225 per
        ounce
        of gold.
  We
        had
        planned to continue mining at Florida Canyon throughout 2005, however,
        management determined at the end of February 2005 to focus its personnel
        and
        resources on the Standard Mine and therefore the decision was taken to
        temporarily suspend mining activity from March 1, 2005 and to continue to
        produce gold by leaching down the gold contained within the existing pad
        at
        Florida Canyon.
  33
  Following
        are key operating statistics at Florida Canyon for the nine months of 2005
        compared to 2004:
  **Nine
                  months ended**
                **September 30,****2005**
              
              **2004**(as
                  restated)Tons
                  mined
              
              
              960,292
              
              
              17,102,792Gold
                  production - ounces
              
              
              24,765
              
              
              55,649Silver
                  production - ounces
              
              
              15,583
              
              
              49,368Total
                  cash costs per ounce
              
              $
              380
              
              $
              354Total
                  production costs per ounce
              
              $
              412
              
              $
              390Total
                  revenue ($ millions)
              
              $
              9.5
              
              $
              20.1Capital
                  expenditures ($ millions)
              
              $
              0.0
              
              $
              1.1
 
 A
        $3.6
        million gain on sale of spare mining equipment at Florida Canyon was realized
        during the nine months ended September 30, 2005.
  There
        was
        a $38,000 gain for the nine months ended September 30, 2005 for the commodities
        contract with Standard Bank as compared to a $516,000 gain for the nine months
        ended September 30, 2004. This commodities contract was finished in April
        2005 **.**
  *Standard
        Mine* .
        The
        Standard Mine continued loading ore onto the heap leach pad, leaching gold
        and
        expanding the area under leach during the first nine months of
        2005.
  The
        Standard Mine entered into commercial production on June 1, 2005. Under Canadian
        GAAP it was determined that due to construction of the plant only being
        completed in late February 2005, coupled with the limited number of leach
        fields
        available, the mine was not in production in the first five months of 2005.
        The
        Standard Mine produced 11,241 ounces of gold during the four months June
        to
        September at a total cash cost of $380 per ounce. For the first five months
        of
        2005 the mine produced 6,731 ounces of gold, the revenue which was offset
        against the operating expenses and the net sum treated as capital
        expenditures.
  Following
        are key operating statistics at the Standard Mine for the first nine months
        of
        2005 compared to 2004:
  **Nine
                  months ended**
                **September 30,****2005**
              
              **2004**Ore
                  mined - tons
              
              
              1,887,360
              
              
              Not
                  in productionWaste
                  mined - tons
              
              
              1,675,846Total
                  tons mined
              
              
              3,563,206Strip
                  ratio
              
              
              0.9:1Grade
                  of gold ozs/ton
              
              
              0.0166Gold
                  production - ounces
              
              
              11,241Silver
                  production - ounces
              
              
              30,916Total
                  cash costs per ounce
              
              $
              380Total
                  production costs per ounce
              
              $
              380Total
                  revenue ($ millions)
              
              $
              5.2Capital
                  expenditures ($ millions)
              
              $
              2.9
              
              $
              5.1
  34
  During
        the first nine months of 2005, tons mined were slightly above forecast at
        3,563,206 tons of which 1,887,360 tons were ore with the balance being waste
        giving a strip ratio of 0.9:1. This strip ratio was slightly higher than
        the
        average expected for the year 2005 of 0.8:1. All ore tons were placed on
        the pad
        at an average grade of 0.0166 ounces per ton.
  Capital
        expenditures for the first nine months of 2005 were $2.9 million, $2.2 million
        lower than the same period 2004.
  **MATERIAL
        CHANGES IN LIQUIDITY**
 To
          date,
          we have funded our operations primarily through issuances of debt and equity
          securities. At September 30, 2005, cash and cash equivalents were $0.3
          million,
          compared to cash and cash equivalents of $6.9 million at December 31, 2004.
          The
          decrease in cash from December 31, 2004 was primarily the result of operating
          cash outflows of $6.7 million, investment activities of $3.3 million plus
          a
          reduction of capital lease debt of $0.8 million. These outflows were offset
          by
          funds from proceeds on disposal of property, plant and equipment of $2.0
          million
          and sale of common shares of $5.9 million.
  Investing
          activities used $3.3 million of cash during the nine months ended September
          30,
          2005, compared to $13.8 million in the same period 2004. Capital expenditures
          in
          the first nine months were $4.7 million of which $4.4 million were for
          the
          further development of the Black Fox project. In addition to this capital
          expenditure, $1.6 million was invested in the restricted cash account as
          part of
          the Montana Tunnels reclamation liability.
  We
          intend
          to deposit $10.9 million of the $14.0 million we expect to receive in the
          fourth
          quarter from the sale of the Nevada Assets as substitute collateral for
          our
          $8.73 million convertible debentures, which are currently secured by the
          Nevada
          Assets. Subject to certain conditions, we could replace this future cash
          collateral with Black Fox as security for the convertible debentures. By
          the end
          of the second quarter of 2006, we expect we will be able to meet those
          conditions, resulting in additional funds being available to the Company
          for
          further development of Black Fox, exploration at Huizopa and other general
          corporate purposes.
  We
          believe that our current funds together with the October 2005 $2.5 million
          cash
          advance on the purchase price for the Nevada Assets, the remaining $0.6
          million
          the we expect to receive for the sale of the Nevada Assets, net of cash
          used as
          cash collateral for the debentures, and the contemplated $3.5 million private
          placement investment by Jipangu will be sufficient to fund our working
          capital
          and exploration and development expenditures for the next twelve
          months. In
          addition, we may raise additional financing from the sale of debt or equity
          securities which may include Canadian flow-through financing to fund a
          portion
          of our exploration expenditures at Black Fox. Exploration and development
          expenditures for Huizopa and Black Fox are estimated at $1.0 million for
          the
          last quarter of 2005. If we do not sell the Nevada Assets or successfully
          generate cash flow from our mines, we would be required to secure additional
          financing to enable us to continue as a going concern and undertake our
          expenditure programs.
 35
  Financing
        activities for the nine months ended September 30, 2005 included (1) completing
        in January 2005 the second tranche of a registered offering of 4,199,998
        units
        with an issue price of $0.75 for proceeds of $2.8 million, net of expenses
        of
        $0.3 million and fair value of broker’s compensation warrants of $0.2 million,
        and (2) completing on June 3, 2005, the sale to Jipangu of 10,000,000 common
        shares at $0.32 per share, proceeds from which amounted to $3.2 million,
        net of
        expenses of $32,000.
  **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 9 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.
  On
        March
        30, 2005, the Financial Accounting Standards Board (“FASB”) ratified the
        consensus of the EITF Issue 04-6 that stripping costs incurred during the
        production phase of a mine are variable production costs that should be included
        in the costs of the inventory produced during the period that the stripping
        costs are incurred.
  In
        the
        first quarter of 2005 and prior periods, Apollo deferred or accrued stripping
        costs incurred during production, as appropriate, and charged these costs
        to
        operations on the basis of the estimated average stripping ratio for Montana
        Tunnels. Commencing in the second quarter of 2005, Apollo changed its accounting
        policy under Canadian GAAP and U.S. GAAP with respect to stripping costs
        to be
        consistent with the consensus reached by the EITF, on the basis that the
        consensus results in a more reliable, relevant and consistent application
        of
        GAAP. This change has been applied retrospectively by restating prior periods.
        The effect of this change was to increase the deficit at January 1, 2004
        by
        $24,033,000 and to increase the net loss for the year ended December 31,
        2004 by
        $12,818,000 ($0.16 per share). The net loss for the three months and nine
        months
        ended September 30, 2004 increased by $4,097,000 ($0.05 per share) and
        $11,446,000 ($0.15 per share), respectively, as a result of this
        change.
  **CONTRACTUAL
        OBLIGATIONS**
  The
        Company has several outstanding equipment leases and financings. As of September
        30, 2005, there are no material changes from the information presented in
        the
        Company’s Annual Report.
  **OFF
        BALANCE SHEET ARRANGEMENTS**
  We
        have a
        contingent liability at our Black Fox property in the form of a Cdn $3.0
        million
        payment to the original owners of the property due if and when the mine reaches
        an average production level of 300 tonnes of ore per day over a 30 day
        period **.**
  **ENVIRONMENTAL**
  As
        of
        September 30, 2005, we have accrued $12.4 million related to reclamation,
        severance and other closure requirements at Montana Tunnels, an increase
        of $0.6
        million from December 31, 2004. This liability is covered by a combination
        of
        surety bonds, totaling $15.8 million, and cash bonds totaling $1.3 million,
        for
        a total reclamation surety, at September 30, 2005 of $17.1 million. We have
        accrued what management believes is the present value of our best estimate
        of
        the liability as of September 30, 2005; however, it is possible that our
        obligation may change in the near or long term depending on a number of
        factors.
  36
  **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, 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 a fixed interest rate
        basis. Over time the rates received on such investments may fluctuate with
        changes in economic conditions. As a result our investment income may fall
        short
        of expectations during periods of lower interest rates. We estimate that
        given
        the cash balances expected during 2005, a one percent change in interest
        rates
        would result in a $100,000 change in interest income. We may in the future
        actively manage our exposure to interest rate risk.
  **Foreign
        Currency Exchange Rate Risk**
  The
        price
        of gold is denominated in United States dollars and the majority of our revenues
        and expenses are denominated in United States dollars. To the extent there
        are
        fluctuations in local currency exchange rates against the dollar, the
        devaluation of a local currency is generally economically neutral or beneficial
        to the operation because local salaries and supplies will decrease against
        the
        U.S. dollar revenue stream. Approximately 52% of our cash and cash equivalents
        were invested in Canadian dollars at September 30, 2005. We have realized
        exchange losses during 2005 due to a decrease in the value of the Canadian
        dollar versus the U.S. dollar. We currently do not utilize market
        risk
        sensitive instruments to manage our exposure.
  **Commodity
        Price Risk**
  We
        are
        engaged in gold mining and related activities, including exploration,
        extraction, processing and reclamation. Gold is our primary product and,
        as a
        result, changes in the price of gold could significantly affect our results
        of
        operations and cash flows. According to current estimates, a $10 change in
        the
        price of gold would result in a $0.3 million change in pre-tax earnings and
        cash
        flows from continuing operations for the last quarter of 2005. We have in
        the
        past purchased puts/calls and we have no ounces of puts/calls outstanding
        at
        September 30, 2005. We may in the future more actively manage our exposure
        through hedging programs.
  **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.
  37
  As
        of the
        end of the period covered by this report, we carried out an evaluation, under
        the supervision of our management, including the Chief Executive Officer
        and
        Chief Financial Officer, of the effectiveness of the design and operation
        of our
        disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b)
        under
        the Exchange Act. Based upon, and as of the date of this evaluation, the
        Chief
        Executive Officer and Chief Financial Officer concluded that our disclosure
        controls and procedures were not effective, because of the material weaknesses
        discussed below. In light of the material weaknesses described below, we
        performed additional analysis and other post-closing procedures to ensure
        our
        consolidated financial statements are prepared in accordance with generally
        accepted accounting principles. Accordingly, management believes that the
        financial statements included in this report fairly present in all material
        respects our financial condition, results of operations and cash flows for
        the
        periods presented.
  We
        identified material weaknesses for the year ended December 31, 2004 in two
        areas. A material weakness is a significant deficiency, or combination of
        significant deficiencies, that results in more than a remote likelihood that
        a
        material misstatement of the annual or interim financial statements will
        not be
        prevented or detected. First, we have deficient inventory control and management
        processes and lack of segregation of procurement and accounting duties at
        our
        Florida Canyon Mine, primarily due to a lack of sufficient personnel at the
        Florida Canyon Mine. Second, we lack appropriate review of non-routine or
        complex accounting matters, 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.
  Not
        all
        of these deficiencies have been fully remediated. The first of these
        deficiencies relates primarily to staffing at our Nevada Assets, assets
        held for sale. As of the end of September 2005 we have implemented new inventory
        procedures and have added staff to our warehouse. As a result of these measures
        we believe the deficiencies with regard to the inventory control have been
        remediated. Additional steps have been taken to improve the effectiveness
        of the
        internal controls with regard to the management processes and a lack of
        segregation of procurement and accounting duties at our Nevada Assets. However,
        our internal audit team has not fully monitored and tested these controls
        because the assets are under contract for sale. Therefore, the Company believes
        these significant deficiencies in aggregate remain significant enough to
        be
        reported as a “material weakness” in our financial controls as defined in
        AS No. 2. We will continue to monitor the effectiveness of
        our
        internal controls and make further changes our management determines
        appropriate.
  The
        second material weakness relates to lack of appropriate review of non-routine
        or
        complex accounting matters, relating accounting entries, and appropriate
        documentation, disclosure and application of Canadian and U.S. GAAP, primarily
        due to a lack of sufficient personnel with a level of technical accounting
        expertise commensurate with our reporting requirements. In the second quarter,
        we established a Financial Disclosure Policy Committee to review all non-routine
        accounting matters and disclosure and application of Canadian and U.S. GAAP,
        added additional technical accounting expertise to the accounting staff,
        and
        implemented formal policies addressing the internal controls over non-routine
        or
        complex accounting matters, accounting entries, appropriate documentation,
        and
        disclosures. During the third quarter, we began our evaluation of these controls
        and procedures and in the fourth quarter we will continue our evaluation
        to
        determine if these controls are operating effectively.
  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. Except for the steps described above, there have been no
        other
        changes in our internal control over financial reporting, which have materially
        affected, or are reasonably likely to materially affect, such internal
        controls.
  38
  **PART
        II** **OTHER
        INFORMATION**
  **ITEM
        1.** **LEGAL
        PROCEEDINGS**
  None
  **ITEM
        2.** **UNREGISTERED
        SALES OF EQUITY IN SECURITIES AND USE OF PROCEEDS**
  None
  **ITEM
        3.** **DEFAULTS
        UPON SENIOR SECURITIES**
  None
  **ITEM
        4.** **SUBMISSION
        OF MATTERS TO A VOTE OF SECURITY HOLDERS**
  None
  **ITEM
        5.** **OTHER
        INFORMATION**
  None
  **ITEM
        6.** **EXHIBITS**
  **Exhibit
                  No.**
              **Title
                  of Exhibit**31.1
              Certification
                  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act31.2
              Certification
                  of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                  Act32.1
              Certification
                  of Chief Executive Officer and Chief Financial Officer pursuant
                  to Section
                  906 of the Sarbanes-Oxley Act
 
 39
  **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: November
                8, 2005
              By:
              /s/ R.
                DAVID RUSSELLR.
                  David Russell, President and
                Chief
                  Executive Officer
  Date: November
                  8, 2005
                By:
                /s/
                  MELVYN WILLIAMSMelvyn
                    Williams,
                  Chief
                      Financial Officer and Senior Vice President Finance and Corporate
                      Development
  **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
  40