**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





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


**SECURITIES
      EXCHANGE ACT OF 1934**





For
      the
      quarterly period ended March 31, 2008





OR





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


**SECURITIES
      EXCHANGE ACT OF 1934**





Commission
      File Number: 001-31593





**APOLLO
      GOLD CORPORATION**


(Exact
      name of registrant as specified in its charter)





**Yukon
                Territory, Canada**
            **Not
                Applicable**(State
                or other jurisdiction of
              incorporation
                or organization)
            (I.R.S.
                Employer Identification No.)





**5655
      South Yosemite St., Suite 200**


**Greenwood
      Village, Colorado 80111-3220**


(Address
      of principal executive offices) (Zip code)





Registrant’s
      telephone number, including area code: **(720)
      886-9656**





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes
þ No o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definitions of “large
      accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
      12b-2 of the Exchange Act.





Large
                Accelerated Filer o
            Accelerated
                Filer oNon-Accelerated
                Filer o(do not check if a smaller
              reporting
                company)
            Smaller
                Reporting Company þ





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


Yes
o No þ




At
      May 6,
      2008, there were 160,975,757  common
      shares of Apollo Gold Corporation outstanding.










**TABLE
      OF CONTENTS**





*Page*PART
                I
            FINANCIAL
                INFORMATION
            4ITEM
                1.
            FINANCIAL
                STATEMENTS (Unaudited)
            4Condensed
                Consolidated Balance Sheets - As of March 31, 2008
                and as of December 31, 2007
            5Condensed
                Consolidated Statements of Operations and
                Comprehensive Income (Loss) for the Three Months Ended March 31,
                2008 and
                2007
            6Condensed
                Consolidated Statements of Shareholders’ Equity
                for the Year ended December 31, 2007 and the Three Months Ended March
                31,
                2008
            7Condensed
                Consolidated Statements of Cash Flows for the
                Three Months Ended March 31, 2008 and 2007
            8Notes
                to the Condensed Consolidated Financial
                Statements
            9ITEM
                2.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                AND RESULTS OF OPERATIONS
            28ITEM
                3.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK
            33ITEM
                4.
            CONTROLS
                AND PROCEDURES
            34PART
                II
            OTHER
                INFORMATION
            34ITEM
                1.
            LEGAL
                PROCEEDINGS
            34ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF
                PROCEEDS
            35ITEM
                3.
            DEFAULTS
                UPON SENIOR SECURITIES
            35ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS
            35ITEM
                5.
            OTHER
                INFORMATION
            35ITEM
                6.
            EXHIBITS
            35INDEX
                TO EXHIBITS
            37Certification
                of CEO Pursuant to Section 302
            Exhibit
                31.1Certification
                of CFO Pursuant to Section 302
            Exhibit
                31.2Certification
                of CEO and CFO Pursuant to Section 906
            Exhibit
                32.1




**STATEMENTS
      REGARDING FORWARD LOOKING INFORMATION**




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




·
            operational
                results and cash flows from the Montana Tunnels
                mine;




·
            the
                establishment and estimates of mineral reserves and
                resources;




2




·
            production
                and production costs;




·
            daily
                production and mill throughput
                rates;




·
            cash
                operating costs;




·
            total
                cash costs;




·
            grade
                of ore mined and milled;




·
            grade
                of concentrates produced;




·
            anticipated
                expenditures for development, exploration, and corporate
                overhead;




·
            timing
                and issue of permits;




·
            expansion
                plans for existing properties;




·
            plans
                for Black Fox and Huizopa;




·
            estimates
                of closure costs;




·
            future
                financing of Apollo projects;




·
            liquidity;




·
            estimates
                of environmental liabilities;




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




·
            factors
                impacting our results of operations;
                and




·
            the
                impact of adoption of new accounting
                standards.




These
      forward looking statements are subject to numerous risks, uncertainties and
      assumptions including:  unexpected
      changes in business and economic conditions; significant increases or
      decreases in gold and zinc prices; changes in interest and currency exchange
      rates; timing and amount of production; unanticipated grade changes;
      unanticipated recovery or production problems; changes in mining and milling
      costs; operational problems at our mining property; metallurgy, processing,
      access, availability of materials, equipment, supplies and water; determination
      of reserves; changes in project parameters; costs and timing of development
      of
      new reserves; results of current and future exploration activities; results
      of
      pending and future feasibility studies; joint venture relationships; political
      or economic instability, either globally or in the countries in which we
      operate; local and community impacts and issues; timing of receipt of government
      approvals; accidents and labor disputes; environmental costs and risks;
      competitive factors, including competition for property acquisitions;
      availability of external financing on reasonable terms or at all; and the
      factors discussed in our Annual Report on Form 10-K for the year ended December
      31, 2007 under the heading “Risk Factors.” Many of these factors are beyond our
      ability to control and predict. These factors are not intended to represent
      a
      complete list of the general or specific factors that may affect us. We disclaim
      any obligation to update forward looking statements, whether as a result of
      new
      information, future events or otherwise.




3




**ACCOUNTING
      PRINCIPLES, REPORTING CURRENCY AND OTHER INFORMATION**




Apollo
      Gold Corporation prepares its consolidated financial statements in accordance
      with accounting principles generally accepted in Canada and publishes its
      financial statements in United States dollars. This Quarterly Report on Form
      10-Q should be read in conjunction with our condensed consolidated financial
      statements and related notes included in this quarterly report, as well as
      our
      annual financial statements for the fiscal year ended December 31, 2007
      included in our Annual Report on Form 10-K. Certain classifications have been
      made to the prior period financial statements to conform with the current period
      presentation.




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




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




**NON-GAAP
      FINANCIAL INFORMATION**




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




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




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




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




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




**PART
      I — FINANCIAL INFORMATION**




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




These
      condensed consolidated financial statements should be read in conjunction with
      the financial statements, accompanying notes and other relevant information
      included in the Company’s Annual Report on Form 10-K for the year ended
      December 31, 2007 filed with the Securities and Exchange Commission on
      March 25, 2008.




4


**APOLLO
      GOLD CORPORATION**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


(In
      thousands of U.S. dollars)


(Unaudited)




**March 31,**
              **2008**
            
            **December 31,**
              **2007****ASSETS**CURRENTCash
                and cash equivalents
            
            $
            2,868
            
            $
            4,852Derivative
                instruments (Note 5)
            
            
            1,246
            
            
            2,101Restricted
                certificates of deposit
            
            
            1,000
            
            
            1,000Accounts
                receivable and other
            
            
            3,865
            
            
            1,846Prepaids
            
            
            261
            
            
            509Inventories
                (Note 6)
            
            
            4,086
            
            
            2,169Total
                current assets
            
            
            13,326
            
            
            12,477Long-term
                investments (Note 5)
            
            
            1,369
            
            
            1,467Property,
                plant and equipment
            
            
            49,308
            
            
            48,378Deferred
                stripping costs
            
            
            3,729
            
            
            4,787Restricted
                certificates of deposit
            
            
            7,291
            
            
            6,715Other
                long-term assets
            
            
            89
            
            
            84Future
                income tax assets
            
            
            –
            
            
            1,165TOTAL
                ASSETS
            
            $
            75,112
            
            $
            75,073**LIABILITIES**CURRENTAccounts
                payable
            
            $
            2,056
            
            $
            2,748Accrued
                liabilities
            
            
            2,919
            
            
            2,940Property
                and mining taxes payable
            
            
            1,110
            
            
            957Notes
                payable and other current debt
            
            
            4,688
            
            
            7,617Convertible
                debentures
            
            
            4,987
            
            
            –Total
                current liabilities
            
            
            15,760
            
            
            14,262Accrued
                long-term liabilities
            
            
            295
            
            
            289Notes
                payable
            
            
            127
            
            
            159Convertible
                debentures
            
            
            –
            
            
            5,537Accrued
                site closure costs
            
            
            9,627
            
            
            9,442Deferred
                gain (Note 4)
            
            
            1,956
            
            
            2,511TOTAL
                LIABILITIES
            
            
            27,765
            
            
            32,200Continuing
                operations (Note 1)
              Commitments
                and contingencies (Note 11)**SHAREHOLDERS’
                EQUITY**Share
                capital (Note 7)
            
            
            167,355
            
            
            166,424Equity
                component of convertible debentures
            
            
            2,044
            
            
            2,238Note
                warrants
            
            
            2,234
            
            
            2,292Contributed
                surplus
            
            
            14,732
            
            
            14,591Deficit
            
            
            (139,018
            )
            
            (142,672
            )TOTAL
                SHAREHOLDERS’ EQUITY
            
            
            47,347
            
            
            42,873TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            75,112
            
            $
            75,073




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




5


**APOLLO
      GOLD CORPORATION**


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


(U.S.
      dollars and shares in thousands, except per share amounts)


(Unaudited)





**Three months ended**
              **March 31,****2008**
            
            **2007**Revenue
                from sale of minerals
            
            $
            15,902
            
            $
            2,890Operating
                expensesDirect
                operating costs
            
            
            9,061
            
            
            3,063Depreciation
                and amortization
            
            
            404
            
            
            250General
                and administrative expenses
            
            
            929
            
            
            1,140Accretion
                expense – accrued site closure costs
            
            
            177
            
            
            127Amortization
                of deferred gain
            
            
            (555
            )
            
            (71
            )Exploration
                and business development
            
            
            756
            
            
            1,55210,772
            
            
            6,061Operating
                income (loss)
            
            
            5,130
            
            
            (3,171
            )Other
                income (expenses)Interest
                income
            
            
            126
            
            
            188Interest
                expense (Note 8)
            
            
            (1,148
            )
            
            (1,145
            )Financing
                costs
            
            
            –
            
            
            (480
            )Realized
                gains on derivative contracts
            
            
            518
            
            
            –Unrealized
                losses on derivative contracts
            
            
            (855
            )
            
            –Foreign
                exchange loss and other
            
            
            (117
            )
            
            (39
            )Net
                income (loss) and comprehensive income (loss) for the
                period
            
            $
            3,654
            
            $
            (4,647
            )Basic
                and diluted net income (loss) per share
            
            $
            0.02
            
            $
            (0.03
            )Basic
                weighted-average number of shares outstanding
            
            
            159,336
            
            
            142,673Diluted
                weighted-average number of shares outstanding
            
            
            165,023
            
            
            142,673




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




6


**APOLLO
      GOLD CORPORATION**


**CONDENSED
      CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY**


(U.S.
      dollars and shares in thousands)


(Unaudited)


**Share Capital**
              
              **Equity**
                **Component**
                **of****Number**
                **of Shares**
              
              **Amount**
              
              **Convertible**
                **Debentures**
              
              **Note**
                **Warrants**
              
              **Contributed**
                **Surplus**
              
              **Deficit**
              
              **Total**Balance
                  January 1, 2007, as adjusted
              
              
              142,282
              
              $
              159,029
              
              $
              1,809
              
              $
              1,062
              
              $
              11,166
              
              $
              (145,088
              )
              $
              27,978Shares
                  issued for services
              
              
              120
              
              
              52
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              52Shares
                  issued for Huizopa settlement
              
              
              1,000
              
              
              540
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              540Shares
                  issued for Black Fox mineral rights
              
              
              1,058
              
              
              527
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              527Flow-through
                  shares issued for cash and related compensation warrants
              
              
              7,455
              
              
              3,857
              
              
              –
              
              
              –
              
              
              58
              
              
              –
              
              
              3,915Income
                  tax benefits renounced to shareholders of flow–through units issued in
                  2006
              
              
              –
              
              
              (234
              )
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              (234
              )Equity
                  component of convertible debentures
              
              
              –
              
              
              –
              
              
              2,292
              
              
              –
              
              
              –
              
              
              –
              
              
              2,292Note
                  warrants
              
              
              –
              
              
              –
              
              
              –
              
              
              2,292
              
              
              –
              
              
              –
              
              
              2,292Debenture
                  compensation warrants
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              467
              
              
              –
              
              
              467Note
                  warrants exercised
              
              
              3,933
              
              
              2,506
              
              
              –
              
              
              (1,062
              )
              
              129
              
              
              –
              
              
              1,573Conversion
                  of debentures
              
              
              400
              
              
              147
              
              
              (54
              )
              
              –
              
              
              –
              
              
              –
              
              
              93Redemption
                  of debentures
              
              
              –
              
              
              –
              
              
              (1,809
              )
              
              –
              
              
              1,809
              
              
              –
              
              
              –Stock-based
                  compensation
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              962
              
              
              –
              
              
              962Net
                  income
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              2,416
              
              
              2,416Balance,
                  December 31, 2007
              
              
              156,248
              
              
              166,424
              
              
              2,238
              
              
              2,292
              
              
              14,591
              
              
              (142,672
              )
              
              42,873Warrants
                  exercised
              
              
              3,272
              
              
              1,463
              
              
              –
              
              
              (58
              )
              
              (1
              )
              
              –
              
              
              1,404Conversion
                  of debentures
              
              
              1,456
              
              
              633
              
              
              (194
              )
              
              –
              
              
              –
              
              
              –
              
              
              439Income
                  tax benefits renounced to shareholders of flow–through units issued in
                  2007
              
              
              –
              
              
              (1,165
              )
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              (1,165
              )Stock-based
                  compensation
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              142
              
              
              –
              
              
              142Net
                  income and comprehensive income
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              3,654
              
              
              3,654Balance,
                  March 31, 2008
              
              
              160,976
              
              $
              167,355
              
              $
              2,044
              
              $
              2,234
              
              $
              14,732
              
              $
              (139,018
              )
              $
              47,347




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




7


**APOLLO
      GOLD CORPORATION**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


(In
      thousands of U.S. dollars)


(Unaudited)





**Three months ended**
              **March 31,****2008**
            
            **2007**Operating
                activitiesNet
                income (loss) for the period
            
            $
            3,654
            
            $
            (4,647
            )Items
                not affecting cash:Depreciation
                and amortization
            
            
            404
            
            
            250Amortization
                of deferred stripping costs
            
            
            1,058
            
            
            103Financing
                costs
            
            
            –
            
            
            174Stock–based
                compensation
            
            
            142
            
            
            198Shares
                issued for services and settlement of claims
            
            
            –
            
            
            550Accretion
                expense - accrued site closure costs
            
            
            177
            
            
            127Accretion
                expense - convertible debentures
            
            
            893
            
            
            797Interest
                paid on convertible debentures
            
            
            (1,016
            )
            
            (265
            )Amortization
                of deferred gain
            
            
            (555
            )
            
            (71
            )Net
                change in value of derivative instruments
            
            
            337
            
            
            –Other
            
            
            55
            
            
            4Net
                change in non-cash operating working capital items (Note
                12)
            
            
            (4,247
            )
            
            398Net
                cash provided by (used in) operating activities
            
            
            902
            
            
            (2,382
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            
            (1,256
            )
            
            (2,875
            )Proceeds
                from settlement of derivative instruments
            
            
            518
            
            
            –Deferred
                stripping costs
            
            
            –
            
            
            (2,252
            )Restricted
                certificates of deposit
            
            
            (576
            )
            
            (393
            )Net
                cash used in investing activities
            
            
            (1,314
            )
            
            (5,520
            )Financing
                activitiesProceeds
                on issuance of convertible debentures and note warrants,
                net
            
            
            –
            
            
            8,062Proceeds
                from exercise of warrants
            
            
            1,404
            
            
            66Proceeds
                from notes payable
            
            
            –
            
            
            1,250Payments
                of notes payable
            
            
            (2,962
            )
            
            (360
            )Notes
                receivable from Elkhorn Tunnels, LLC
            
            
            –
            
            
            1,865Net
                cash (used in) provided by financing activities
            
            
            (1,558
            )
            
            10,883Effect
                of exchange rate changes on cash
            
            
            (14
            )
            
            (4
            )Net
                (decrease) increase in cash and cash equivalents
            
            
            (1,984
            )
            
            2,977Cash
                and cash equivalents, beginning of period
            
            
            4,852
            
            
            4,512Cash
                and cash equivalents, end of period
            
            $
            2,868
            
            $
            7,489SUPPLEMENTAL
                CASH FLOW INFORMATIONInterest
                paid
            
            $
            1,388
            
            $
            335Income
                taxes paid
            
            $
            –
            
            $
            –




See
      Note
      12 for additional supplemental cash flow information.




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




8


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




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




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




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




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




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




Apollo
      has a development property, the Black Fox development project (the “Black Fox
      Project”), which is located near the Township of Matheson in the Province of
      Ontario, Canada. Apollo also owns Mexican subsidiaries which own concessions
      at
      the Huizopa exploration project (the “Huizopa Project”), located in the Sierra
      Madres in Chihuahua, Mexico. The Huizopa Project is subject to an 80% Apollo/20%
      Mineras Coronado joint venture agreement.




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




***(a)***  These
      unaudited consolidated interim financial statements have been prepared in
      accordance with Canadian generally accepted accounting principles (“Canadian
      GAAP”) and except as described in Note 15, 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, 2007, 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,
      2007.




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.




9




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




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




***(b)***
            Changes
                in accounting policies




During
      the quarter, the Company adopted three new presentation and disclosure standards
      that were issued by the Canadian Institute of Chartered Accountants: Handbook
      Section 1535, *Capital
      Disclosures* (“Section 1535”), Handbook Section 3862, *Financial
      Instruments – Disclosures* (“Section 3862”) and Handbook Section 3863, *Financial
      Instruments – Presentation* (“Section 3863”). Section 1535 requires the disclosure of both qualitative and
      quantitative information that enables users of financial statements to evaluate
      (i) an entity’s objectives, policies and processes for managing capital; (ii)
      quantitative data about what the entity regards as capital; (iii) whether the
      entity has complied with any capital requirements; and (iv) if it has not
      complied, the consequences of such non-compliance. Sections 3862 and 3863
      replace Handbook Section 3861, Financial Instruments - Disclosure and
      Presentation, revising and enhancing its disclosure requirements and carrying
      forward unchanged its presentation requirements for financial instruments.
      Sections 3862 and 3863 place increased emphasis on disclosures about the nature
      and extent of risks arising from financial instruments and how the entity
      manages those risks.





During
      the quarter, the Company adopted Handbook Section 3031 – *Inventories* ,
      which
      replaces the former Section 3030 - *Inventories* .
      Section
      3031 establishes standards for the measurement and disclosure of inventories,
      including the measurement of inventories at the lower of cost and net realizable
      value, consistent use of either first-in, first-out (FIFO) or weighted average
      cost formulas and the reversal of inventory write-downs previously recognized.
      The Company has applied the new standard prospectively. The adoption of Section
      3031 on January 1, 2008, did not have a material impact on the Company’s
      financial condition or operating results.





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




On
      July
      28, 2006, Apollo entered into a JV Agreement with Elkhorn in respect of the
      Montana Tunnels mine. Elkhorn contributed $13 million in return for a 50%
      interest in the Mine and Montana Tunnels Mining, Inc., a wholly owned subsidiary
      of Apollo (“MTMI”), contributed all of its assets and liabilities related to the
      Mine into the joint venture for a 50% interest in the Mine. Effective December
      31, 2006, the Mine became a 50/50 joint venture. MTMI is the operator of the
      Mine. A separate committee consisting of two designees from each of MTMI and
      Elkhorn oversees the joint venture.




Elkhorn
      receives 55% and Apollo receives 45% of the positive free cash flow, as defined
      in the JV agreement, from the Mine until such time as Elkhorn has received
      cash
      flow of $13 million (at which time Apollo will have received $10.6 million).
      At
      that time, Apollo will become entitled to 60% and Elkhorn 40% of the positive
      free cash flow from the Mine, until both parties have received an equal amount
      (at which time Apollo and Elkhorn will have each received $17.7 million).
      Thereafter, the sharing will be 50/50. Additionally, Elkhorn is entitled to
      a
      10% interest distribution (reduced from 12% effective April 1, 2007) charged
      to
      the joint venture as interest expense (Note 8)  on
      its
      initial contribution of $13 million until it has received cash flow of $13
      million. The interest distribution is based on the declining balance of this
      cash flow of $13 million and, as of March 31, 2008, Elkhorn had received cash
      flow of $9.1 million from the joint venture and Apollo had received $7.4
      million. These cash flows to Elkhorn and Apollo are included in net cash used
      in
      financing activities below but are eliminated in the consolidated cash
      flow.




10


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**4.**
            **MONTANA
                TUNNELS JOINT VENTURE
                (continued)**




Apollo
      accounts for its 50% interest in the Montana Tunnels joint venture using the
      proportionate consolidation method. As of December 31, 2006, the Company
      recorded a deferred gain on the transfer of assets and liabilities to the joint
      venture of $3.8 million. The deferred gain is amortized using the
      units-of-production method over the expected life of the operation based on
      the
      estimated recoverable gold equivalent ounces. Amortization of the deferred
      gain
      was $0.6  million
      and $0.1 million for the three months ended March 31, 2008 and 2007,
      respectively.




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




**March 31,**
              **2008**
            
            **December 31,**
              **2007**Cash
                and cash equivalents
            
            $
            314
            
            $
            306Other
                non-cash current assets
            
            
            6,604
            
            
            3,1906,918
            
            
            3,496Property,
                plant and equipment
            
            
            8,939
            
            
            9,167Deferred
                stripping costs
            
            
            3,729
            
            
            4,787Restricted
                certificates of deposit
            
            
            6,033
            
            
            5,435Total
                assets
            
            $
            25,619
            
            $
            22,885Current
                liabilities
            
            $
            3,887
            
            $
            3,573Notes
                payable
            
            
            121
            
            
            145Accrued
                site closure costs
            
            
            8,479
            
            
            8,314Total
                liabilities
            
            $
            12,487
            
            $
            12,032





Apollo’s
      50% share of the results of operations and cash flows of the Montana Tunnels
      joint venture for the three months ended March 31, 2008 and 2007 is as
      follows:





**March 31,**
              **2008**
            
            **March 31,**
              **2007**Revenue
                from sale of minerals
            
            $
            15,902
            
            $
            2,890Direct
                operating costs
            
            
            9,059
            
            
            3,063Depreciation
                and amortization
            
            
            379
            
            
            224Accretion
                expense – accrued site closure costs
            
            
            165
            
            
            1169,603
            
            
            3,403Operating
                income
            
            
            6,299
            
            
            (513
            )Interest
                income
            
            
            52
            
            
            45Interest
                expense
            
            
            (112
            )
            
            (348
            )Income
                from continuing operations
            
            $
            6,239
            
            $
            (816
            )Net
                cash provided by operating activities
            
            $
            4,824
            
            $
            966Net
                cash used in investing activities
            
            $
            (677
            )
            $
            (2,727
            )Net
                cash used in (provided by) financing activities
            
            $
            (4,139
            )
            $
            1,884





Cash
      used
      in financing activities includes cash distributed to the joint venture partners,
      Apollo and Elkhorn. These cash flows eliminate upon consolidation.




11




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**5.**
            **DERIVATIVE
                  INSTRUMENTS AND LONG-TERM
                  INVESTMENTS**




Fair
      value of derivative instruments and long-term investments as of March 31, 2008
      and December 31, 2007 consists of:




**March 31, 2008**
            
            **December 31, 2007****Cost**
              **Basis**
            
            **Unrealized**
              **Gain**
              **(Loss)**
            
            **Fair**
              **Value**
            
            **Cost**
              **Basis**
            
            **Unrealized**
              **Gain**
              **(Loss)**
            
            **Fair Value**Derivative
                financial instruments – lead and zinc contracts
            
            $
            –
            
            $
            1,246
            
            $
            1,246
            
            $
            –
            
            $
            2,101
            
            $
            2,101Long-term
                investments: Auction rate securities
            
            $
            1,500
            
            $
            (131
            )
            $
            1,369
            
            $
            1,500
            
            $
            (33
            )
            $
            1,467





The
      Company has recorded an other than temporary impairment on its auction rate
      securities in the consolidated statement of operations of $98,000 during the
      three months ended March 31, 2008, and as such, no amounts have been recorded
      in
      other comprehensive income.





**6.**
            INVENTORIES




Inventories
      consist of:




**March 31,**
              **2008**
            
            **December 31,**
              **2007**Concentrate
                inventory
            
            $
            1,072
            
            $
            341Doré
                inventory
            
            
            24
            
            
            56Stockpiled
                ore inventory
            
            
            1,957
            
            
            749Materials
                and supplies
            
            
            1,033
            
            
            1,023$
            4,086
            
            $
            2,169




12




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**7.**
            **SHARE
                CAPITAL**




***(a)***
            Shares
                issued in 2008




For
      the
      three months ended March 31, 2008, there were 3,271,834 shares issued upon
      exercise of warrants for proceeds of $1.4 million and 1,455,800 shares issued
      upon conversion of $0.7 million face value of February 2007 Series-A convertible
      debentures.




***(b)***
            Warrants




The
      following table summarizes outstanding warrants as at March 31, 2008 :




**Date Issued**
            
            **Number of Warrants**
              **and Shares Issuable**
              **upon Exercise**
            
            **Exercise Price**
            
            **Expiry Date**Exercisable
                in US$November
                8, 2006
            
            
            7,510,769
            
            0.50
            
            November
              8, 2009November
                8, 2006
            
            
            1,168,174
            
            0.50
            
            November
              8, 2009February
                23, 2007
            
            
            16,732,000
            
            0.50
            
            February
              23, 2009February
                23, 2007
            
            
            1,201,200
            
            0.50
            
            February
              23, 200926,612,143Exercisable
              in Cdn$October
                30, 2006
            
            
            1,111,111
            
            Cdn$  
                1.15
            
            October
              30, 2008March
                31, 2008
            
            
            5,250
            
            Cdn$  
                1.15
            
            October
              30, 2008October
                31, 2007
            
            
            372,727
            
            Cdn$  
                0.55
            
            April
              30, 20091,489,08828,101,231





In
      addition, 156,166 broker compensation warrants are outstanding which were issued
      on October 30, 2006. Each broker compensation warrant is exercisable at Cdn$0.45
      for two years into one common share of the Company and one-half of one share
      purchase warrant, with each whole share purchase warrant exercisable into one
      common share of the Company at Cdn$1.15 through October 30, 2008. The broker
      compensation warrants expire on October 30, 2008.




***(c)***
            Options




The
      Company has a fixed stock option plan that provides for the granting of options
      to directors, officers, employees and service providers of the Company at a
      price based on the trading price of the Common Shares one trading day preceding
      the date of grant. Options vest over two years and have a 10-year contractual
      term, unless otherwise determined by the Company’s Board of Directors. The
      Company is authorized to issue a maximum of 12,139,686 fixed stock options.
      As
      at March 31, 2008, an aggregate of 3,788,270 fixed stock options were available
      for future grants of awards under the plan.




A
      summary
      of information concerning outstanding fixed stock options at March 31, 2008
      is
      as follows:




13




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**7.**
            **SHARE
                CAPITAL (continued)**




**Number of**
              **Common**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price Per**
              **Share**Balance,
                December 31, 2007
            
            
            6,227,503
            
            $
            0.81Options
                granted
            
            
            2,152,488
            
            
            0.66Options
                cancelled
            
            
            (28,575
            )
            
            0.57Options
                expired
            
            
            –
            
            
            –Balance,
                March 31, 2008
            
            
            8,351,416
            
            $
            0.77







The
      following table summarizes information concerning outstanding and exercisable
      fixed stock options at March 31, 2008:


**Options Outstanding**
              
              **Options Exercisable****Number**
                **Outstanding**
              
              **Expiry Date**
              
              **Weighted**
                **Average**
                **Exercise**
                **Price Per**
                **Share**
              
              **Weighted**
                **Average**
                **Remaining**
                **Contractual**
                **Life (in years****)**
              
              **Number**
                **Exercisable**
              
              **Weighted**
                **Average**
                **Exercise**
                **Price Per**
                **Share**100,000
              
              
              September
                  1, 2011
              
              $
              0.46
              
              
              3.4
              
              
              50,000
              
              $
              0.46678,200
              
              
              February
                  18, 2013
              
              
              2.24
              
              
              4.9
              
              
              678,200
              
              
              2.24260,000
              
              
              March
                  10, 2014
              
              
              2.05
              
              
              5.9
              
              
              260,000
              
              
              2.0525,000
              
              
              May
                  19, 2014
              
              
              1.44
              
              
              6.1
              
              
              25,000
              
              
              1.4421,200
              
              
              August
                  10, 2014
              
              
              0.95
              
              
              6.4
              
              
              21,200
              
              
              0.951,162,000
              
              
              March
                  10, 2015
              
              
              0.65
              
              
              6.9
              
              
              1,162,000
              
              
              0.65100,000
              
              
              August
                  4, 2015
              
              
              0.27
              
              
              7.3
              
              
              100,000
              
              
              0.27300,000
              
              
              December
                  12, 2015
              
              
              0.20
              
              
              7.7
              
              
              300,000
              
              
              0.20125,000
              
              
              March
                  28, 2016
              
              
              0.65
              
              
              8.0
              
              
              125,000
              
              
              0.65200,000
              
              
              May
                  23, 2016
              
              
              0.53
              
              
              8.2
              
              
              100,000
              
              
              0.53108,000
              
              
              August
                  10, 2016
              
              
              0.48
              
              
              8.4
              
              
              54,000
              
              
              0.4840,000
              
              
              November
                  9, 2016
              
              
              0.32
              
              
              8.6
              
              
              20,000
              
              
              0.323,029,703
              
              
              February
                  6, 2017
              
              
              0.57
              
              
              8.9
              
              
              1,514,852
              
              
              0.5749,825
              
              
              May
                  23, 2017
              
              
              0.46
              
              
              9.4
              
              
              -
              
              
              -2,152,488
              
              
              March
                  27, 2018
              
              
              0.66
              
              
              10.0
              
              
              -
              
              
              -8,351,416
              
              
              
              
              $
              0.77
              
              
              8.3
              
              
              4,410,252
              
              $
              0.91




***(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:




**March 31,**
              **2008**
            
            **March 31,**
              **2007**Risk-free
                interest rate
            
            
            2.9
            %
            
            4.0
            %Dividend
                yield
            
            
            0
            %
            
            0
            %Volatility
            
            
            61
            %
            
            71
            %Expected
                life in years
            
            
            6
            
            
            6Weighted
                average grant-date fair value of stock options
            
            $
            0.39
            
            $
            0.37




14




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**8.**
            **INTEREST
                EXPENSE**




Interest
      expense consists of:




**March 31,**
              **2008**
            
            **March 31,**
              **2007**Accretion
                on convertible debentures
            
            $
            893
            
            $
            797Interest
                related to Montana Tunnels joint venture agreement (Note
                4)
            
            
            79
            
            
            278Capital
                leases and other
            
            
            176
            
            
            70$
            1,148
            
            $
            1,145





**9.**
            **INCOME
                TAXES**




The
      Company recorded no income tax expense for the three months ended March 31,
      2008
      since any taxable income will be offset by a recovery of prior tax losses.
      The
      Company did not record a recovery for income taxes for the period ended March
      31, 2007 as the net loss carry forwards are fully offset by a valuation
      allowance.





**10.**
            **EARNINGS
                  PER SHARE**




Basic
      earnings per share is calculated by dividing net income available to common
      shareholders by the weighted average number of common shares outstanding during
      the period. Diluted earnings per share is calculated to reflect the dilutive
      effect of exercising outstanding warrants and stock options by applying the
      treasury stock method.




Earnings
      used in determining earnings per share from continuing operations are presented
      below for the three months ended March 31, 2008.




**Net
                Income**
            
            **Shares**
            
            **Per
                Share****Basic
                earnings per share**Net
                income from continuing operations
            
            $
            3,654
            
            
            159,335,903
            
            $
            0.02Effect
                of dilutive securities: warrants
            
            
            –
            
            
            5,127,349
            
            
            –Effect
                of dilutive securities: stock options
            
            
            –
            
            
            559,341
            
            
            –**Diluted
                earnings per share**Net
                income from continuing operations
            
            $
            3,654
            
            
            165,022,593
            
            $
            0.02





Diluted
      loss per share for the three months ended March 31, 2007 is not presented as
      there were no dilutive securities for that period.





Warrants
      and stock options to purchase
      1.1 million, and 12.1 million s hares
      of
      common stock at average exercise prices of  $1.02
      and
      $0.84 were outstanding as of March 31, 2008 and 2007,  respectively,
      but were not included in the computation of diluted weighted average number
      of
      common shares because the strike prices of the warrants and stock options
      exceeded the price of the common stock. Other warrants and stock options to purchase
      36.3  million
      common shares that were outstanding as of March 31, 2007 were not included
      in the computation of diluted weighted average common shares because their
      effect would have been anti-dilutive. Also, convertible debentures that were
      convertible at average conversion prices of $0.50 and $0.60 per share into
      15.3
      million and 28.8 million common shares that were outstanding at March 31, 2008
      and 2007, respectively, were not included in the computation of diluted weighted
      average common shares because their effect would have been
      anti-dilutive.





15




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**11.**
            **COMMITMENTS
                AND CONTINGENCIES**




In
      May
      2006, a purported class action lawsuit was filed in U.S. Federal Court Missoula
      Division of Montana by 14 former employees at the Montana Tunnels mine alleging
      (i) violations of the Worker Adjustment and Retraining Notification Act of
      1988
      (the “WARN Act”) and the Montana Wage Act and (ii) breach of contract. The
      allegations relate to the termination of the employees following the cessation
      of mining in October 2005. Specifically, the plaintiffs allege that the Company
      gave deficient WARN Act notice and are seeking damages for back pay and
      benefits. A negotiated settlement was tentatively reached between the Company
      and the plaintiffs and is expected to be finalized in 2008. The Company believes
      that the resolution of this matter will not have a material impact on its
      financial statements.




**12.**
            **SUPPLEMENTAL
                  CASH FLOW
                  INFORMATION**




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




**2008**
            
            **2007**(Increase)
                decrease in:Accounts
                receivable and other
            
            $
            (2,018
            )
            $
            (661
            )Prepaids
            
            
            244
            
            
            29Inventories
            
            
            (1,918
            )
            
            (581
            )Increase
                (decrease) in:Accounts
                payable
            
            
            (692
            )
            
            779Accrued
                liabilities
            
            
            (16
            )
            
            895Property
                and mining taxes payable
            
            
            153
            
            
            (63
            )$
            (4,247
            )
            $
            398





***(b)***
            Components
                of cash and cash equivalents are:




**March 31,**
              **2008**
            
            **March 31,**
              **2007**Cash
            
            $
            1,142
            
            $
            261Short-term
                investments
            
            
            1,726
            
            
            7,228$
            2,868
            
            $
            7,489





***(c)***
            Non-cash
                transactions




During
      the three months ended March 31, 2008, Series 2007-A convertible debentures
      with
      a face value of $728,000 were converted and the Company recorded a reduction
      of
      $481,000 in convertible debentures and a corresponding increase in equity.
      Also,
      future income tax assets of $1,165,000 were transferred to share capital upon
      renouncement of expenditures in connection with a flow-through share offering
      completed in October 2007.




During
      the three months ended March 31, 2007, property, plant and equipment totaling
      $39,000 was acquired via issuance of a promissory note and the Company issued
      agent’s compensation warrants with a value of $294,000 for services rendered in
      connection with the issuance of the Series 2007-A convertible
      debentures.





16




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**13.**
            **FAIR
                VALUE OF FINANCIAL
                INSTRUMENTS**




The
      Company examines the various financial instrument risks to which it is exposed
      and assesses the impact and likelihood of those risks. These risks may include
      credit risk, liquidity risk, currency risk, interest rate risk and commodity
      risk. Where material, these risks are reviewed and monitored by the Board of
      Directors.





***(a)***
            Capital
                Risk Management




The
      Company manages its capital to ensure that it will be able to continue as a
      going concern while maximizing the return to shareholders through the
      optimization of the debt and equity balance. The Company’s overall strategy
      remains unchanged from 2007.





The
      capital structure of the Company consists of cash and cash equivalents, notes
      payable and other current debt, convertible debentures and equity attributable
      to common shareholders, comprising issued share capital, equity component of
      convertible debentures, note warrants, contributed surplus and
      deficit.





***(b)***
            Credit
                Risk




Credit
      risk on financial instruments arises from the potential for counterparties
      to
      default on their obligations to the Company. The Company’s credit risk is
      limited to trade receivables in the ordinary course of business. The Company
      sells its metal production exclusively to large international organizations
      with
      strong credit ratings and the balance of trade receivables owed to the Company
      in the ordinary course of business is not significant. The carrying value of
      accounts receivable approximates fair value due to the relatively short periods
      to maturity on these instruments. Therefore, the Company is not exposed to
      significant credit risk and overall the Company’s credit risk has not changed
      significantly from the prior year.




The
      Company assesses quarterly whether there has been an impairment of the financial
      assets of the Company. Other than disclosed in Note 5, the Company has not
      recorded an impairment on any of the financial assets of the Company during
      the
      three month period ending March 31, 2008.




The
      Company’s maximum exposure to credit risk is represented by the carrying amount
      on the balance sheet, which has not changed significantly since year end. There
      are no material financial assets that the Company considers to be past
      due.




***(c)***
            Liquidity
                Risk




Liquidity
      risk is the risk that the Company will not meet its financial obligations as
      they become due. The Company has a planning and budgeting process to monitor
      operating cash requirements including amounts projected for the existing capital
      expenditure program and plans for expansion, which are adjusted as input
      variables change. These variables include, but are not limited to, available
      bank lines, mineral production from existing operations, commodity prices,
      taxes
      and the availability of capital markets. As these variables change, liquidity
      risks may necessitate the need for the Company to conduct equity issues or
      obtain project debt financing.




17




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**13.**
            **FAIR
                VALUE OF FINANCIAL INSTRUMENTS
                (continued)**




Trade
      payables and accrued liabilities are paid in the normal course of business
      typically according to their terms. The Company ensures that there are
      sufficient committed loan facilities to meet its short-term business
      requirements, taking into account its anticipated cash flows from operations
      and
      its holdings of cash and cash equivalents. At March 31, 2008, the Company is
      in
      compliance with its debt covenants. The Company’s overall liquidity risk has not
      changed significantly from the prior year.





***(d)***
            Currency
                Risk




Financial
      instruments that impact the Company’s net income or other comprehensive income
      due to currency fluctuations include: Canadian dollar denominated cash and
      cash
      equivalents and accounts payable. As of March 31, 2008, the sensitivity of
      the
      Company’s net income due to changes in the exchange rate between the Canadian
      dollar and the United States dollar is an increase of $0.2 million in net income
      for a 10% increase in the Canadian dollar and a decrease in net income of $0.2
      million in net income for a 10% decrease in the Canadian dollar.





***(e)***
            Interest
                Rate Risk




The
      Company is exposed to interest rate risk on its outstanding borrowings and
      short-term investments. Currently, the Company’s outstanding borrowings consist
      of a credit facility with a balance of
      $4.1
      million at March 31, 2008 and the Series 2007-A convertible debentures (“the
      Debentures”) which have an aggregate $7.7 million face value at March 31, 2008.
      The credit facility has a floating interest rate based on LIBOR plus 1.25%
      while
      the Debentures have a stated rate of 18% which increased from 12% on February
      23, 2008 as part of the original terms. The Company monitors its exposure to
      interest rates and has not entered into any derivative contracts to manage
      this
      risk. The weighted average interest rate paid by the Company during the quarter
      on its outstanding borrowings was 11.6%.




For
      the
      three months ended March 31, 2008, a 1% increase or decrease in interest rates
      would have impacted the amount of interest expense recorded during the quarter
      by approximately $0.1 million.





***(f)***
            Commodity
                Price Risk




The
      Company’s principal businesses include the sale of several commodities.
      Revenues, earnings and cash flows from the sale of gold, lead, zinc and silver
      are sensitive to changes in market prices, over which the Company has little
      or
      no control. The Company has the ability to address its price-related exposures
      through the limited use of options, future and forward contracts, but generally
      does not enter into such arrangements.




On
      October 15, 2007, in order to meet certain loan criteria of the credit facility
      mentioned in (e) above, the Company entered into certain option contracts to
      buy
      and sell 2,267 tonnes (approximately 5,000,000 lbs) of lead and 3,418 tonnes
      (approximately 7,500,000 lbs) of zinc which equates to approximately 65% and
      40%
      respectively of Apollo's share of lead and zinc production from the Mine during
      the 12-month term of the facility. Approximately half of the contracts remain
      outstanding at March 31, 2008. The lead and zinc option contracts are in the
      form of a no premium collar (buy a put, sell a call) at the following prices:
      Lead - put $1.40 per lb, call $1.90 per lb.; Zinc - put $1.20 per lb, call
      $1.54
      per lb. No gold or silver production was hedged.




18




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**13.**
            **FAIR
                VALUE OF FINANCIAL INSTRUMENTS
                (continued)**




***(g)***
            Fair
                Value Estimation




The
      fair
      value of financial instruments that are not traded in an active market (such
      as
      derivative instruments) is determined using a Black-Scholes model based on
      assumptions that are supported by observable current market conditions. Changes
      in these assumptions to reasonably possible alternative assumptions would not
      significantly affect the Company’s results.





The
      carrying value less impairment provision, if necessary, of cash and cash
      equivalents, restricted certificates of deposit, long-term investments, trade
      receivables and trade payables approximate their fair values. In addition,
      as
      the interest rate on the Company’s credit facility is floating and has no
      unusual rights or terms, the carrying value approximates its fair
      value.





**14.**
            **SEGMENTED
                INFORMATION**




Apollo
      operates the Montana Tunnels mine (a 50% joint venture) in the United States
      and
      the Black Fox development project in Canada. The reportable segments have been
      determined at the level where decisions are made on the allocation of resources
      and capital and where performance is measured. The segment information for
      Montana Tunnels assets and liabilities and the results of operations are
      reported under the proportionate consolidation method as a result of the JV
      Agreement (Note 4). The Montana Tunnels assets and liabilities and results
      of
      operations of the Montana Tunnels joint venture disclosed in Note 4 differ
      from
      the amounts below due to the inclusion of assets and liabilities and results
      of
      operations of Montana Tunnels Mining, Inc. not pertaining to the Montana Tunnels
      joint venture which primarily relate to the Diamond Hill mine. The accounting
      policies for these segments are the same as those followed by the Company as
      a
      whole.




Amounts
      as at March 31, 2008 are as follows:





**Montana**
              **Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            314
            
            $
            18
            
            $
            2,536
            
            $
            2,868Other
                non-cash current assets
            
            
            6,625
            
            
            95
            
            
            3,738
            
            
            10,4586,939
            
            
            113
            
            
            6,274
            
            
            13,326Long-term
                investments
            
            
            –
            
            
            –
            
            
            1,369
            
            
            1,369Property,
                plant and equipment
            
            
            8,947
            
            
            37,285
            
            
            3,076
            
            
            49,308Deferred
                stripping costs
            
            
            3,729
            
            
            –
            
            
            –
            
            
            3,729Restricted
                certificates of deposit
            
            
            6,655
            
            
            628
            
            
            8
            
            
            7,291Other
                long-term assets
            
            
            –
            
            
            89
            
            
            –
            
            
            89Total
                assets
            
            $
            26,270
            
            $
            38,115
            
            $
            10,727
            
            $
            75,112Current
                liabilities
            
            $
            3,896
            
            $
            473
            
            $
            11,391
            
            $
            15,760Notes
                payable and other long-term liabilities
            
            
            121
            
            
            6
            
            
            295
            
            
            422Accrued
                site closure costs
            
            
            9,172
            
            
            455
            
            
            –
            
            
            9,627Deferred
                gain
            
            
            1,956
            
            
            –
            
            
            –
            
            
            1,956Total
                liabilities
            
            $
            15,145
            
            $
            934
            
            $
            11,686
            
            $
            27,765




19




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**14.**
            **SEGMENTED
                INFORMATION (continued)**




Amounts
      at December 31, 2007 are as follows:





**Montana**
              **Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            306
            
            $
            (39
            )
            $
            4,585
            
            $
            4,852Other
                non-cash current assets
            
            
            3,206
            
            
            171
            
            
            4,248
            
            
            7,6253,512
            
            
            132
            
            
            8,833
            
            
            12,477Long-term
                investments
            
            
            –
            
            
            –
            
            
            1,467
            
            
            1,467Property,
                plant and equipment
            
            
            9,176
            
            
            36,100
            
            
            3,102
            
            
            48,378Deferred
                stripping costs
            
            
            4,787
            
            
            –
            
            
            –
            
            
            4,787Restricted
                certificates of deposit
            
            
            6,057
            
            
            650
            
            
            8
            
            
            6,715Other
                long-term assets
            
            
            –
            
            
            84
            
            
            –
            
            
            84Future
                income tax assets
            
            
            –
            
            
            –
            
            
            1,165
            
            
            1,165Total
                assets
            
            $
            23,532
            
            $
            36,966
            
            $
            14,575
            
            $
            75,073Current
                liabilities
            
            $
            3,580
            
            $
            688
            
            $
            9,994
            
            $
            14,262Notes
                payable and other long-term liabilities
            
            
            145
            
            
            14
            
            
            5,826
            
            
            5,985Accrued
                site closure costs
            
            
            8,995
            
            
            447
            
            
            –
            
            
            9,442Deferred
                gain
            
            
            2,511
            
            
            –
            
            
            –
            
            
            2,511Total
                liabilities
            
            $
            15,231
            
            $
            1,149
            
            $
            15,820
            
            $
            32,200





Amounts
      for the three months ended March 31, 2008 and 2007 are as follows:




**Three months ended March 31, 2008****Montana**
              **Tunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            15,902
            
            $
            –
            
            $
            –
            
            $
            15,902Direct
                operating costs
            
            
            9,061
            
            
            –
            
            
            –
            
            
            9,061Depreciation
                and amortization
            
            
            378
            
            
            –
            
            
            26
            
            
            404General
                and administrative expenses
            
            
            –
            
            
            –
            
            
            929
            
            
            929Accretion
                expense – accrued site closure costs
            
            
            177
            
            
            –
            
            
            –
            
            
            177Amortization
                of deferred gain
            
            
            (555
            )
            
            –
            
            
            –
            
            
            (555
            )Exploration
                and business development
            
            
            –
            
            
            25
            
            
            731
            
            
            7569,061
            
            
            25
            
            
            1,686
            
            
            10,772Operating
                income (loss)
            
            
            6,841
            
            
            (25
            )
            
            (1,686
            )
            
            5,130Interest
                income
            
            
            52
            
            
            –
            
            
            74
            
            
            126Interest
                expense
            
            
            (112
            )
            
            –
            
            
            (1,036
            )
            
            (1,148
            )Realized
                gain on derivative contracts
            
            
            –
            
            
            –
            
            
            518
            
            
            518Change
                in unrealized gains - derivative contracts
            
            
            –
            
            
            –
            
            
            (855
            )
            
            (855
            )Foreign
                exchange loss and other
            
            
            –
            
            
            –
            
            
            (117
            )
            
            (117
            )Income
                (loss) from operations
            
            $
            6,781
            
            $
            (25
            )
            $
            (3,102
            )
            $
            3,654Investing
              activitiesProperty,
                plant and equipment expenditures
            
            $
            80
            
            $
            1,176
            
            $
            –
            
            $
            1,256





20




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**14.**
            **SEGMENTED
                INFORMATION (continued)**




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




**15.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S.
                GAAP**




The
      Company prepares its consolidated financial statements in accordance with
      Canadian GAAP. The following adjustments and/or additional disclosures would
      be
      required in order to present the financial statements in accordance with U.S.
      GAAP and with practices prescribed by the U.S. Securities and Exchange
      Commission at March 31, 2008 and December 31, 2007 and for the three months
      ended March 31, 2008 and 2007.




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




21




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)




**15.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**


**Mar 31,**
                **2008**
              
              **Dec 31,**
                **2007****Total
                  assets in accordance with Canadian GAAP**
              
              **$**
              **75,112**
              
              **$**
              **75,073**Deferred
                  financing costs (a)
              
              
              107
              
              
              160Equity
                  accounting for investment in Montana Tunnels joint venture
                  (b)(i)
              
              
              (12,487
              )
              
              (12,032
              )Impairment
                  of property, plant and equipment, and change in depreciation and
                  amortization(b)(ii)
              
              
              (1,759
              )
              
              (1,812
              )Deferred
                  stripping costs (b)(iii)
              
              
              (3,729
              )
              
              (4,787
              )Black
                  Fox development costs(c)
              
              
              (28,022
              )
              
              (26,827
              )Convertible
                  debentures (d)
              
              
              399
              
              
              509Income
                  taxes (e)
              
              
              –
              
              
              (1,165
              )**Total
                  assets in accordance with U.S. GAAP**
              
              **$**
              **29,621**
              
              **$**
              **29,119****Total
                  liabilities in accordance with Canadian GAAP**
              
              **$**
              **27,765**
              
              **$**
              **32,200**Equity
                  accounting for investment in Montana Tunnels joint venture
                  (b)(i)
              
              
              (12,487
              )
              
              (12,032
              )Deferred
                  gain (b)(i)
              
              
              (1,956
              )
              
              (2,511
              )Convertible
                  debentures (d)
              
              
              1,427
              
              
              2,063Income
                  taxes (e)
              
              
              –
              
              
              628**Total
                  liabilities in accordance with U.S. GAAP**
              
              **$**
              **14,749**
              
              **$**
              **20,348****Total
                  shareholders’ equity in accordance with Canadian
                  GAAP**
              
              **$**
              **47,347**
              
              **$**
              **42,873**Deferred
                  financing costs (a)
              
              
              107
              
              
              160Deferred
                  gain (b)(i)
              
              
              1,956
              
              
              2,511Impairment
                  of property, plant and equipment, and change in depreciation and
                  amortization(b)(ii)
              
              
              (1,759
              )
              
              (1,812
              )Deferred
                  stripping costs (b)(iii)
              
              
              (3,729
              )
              
              (4,787
              )Black
                  Fox development costs (c)
              
              
              (28,022
              )
              
              (26,827
              )Convertible
                  debentures (d)
              
              
              (1,028
              )
              
              (1,554
              )Income
                  taxes (e)
              
              
              –
              
              
              (1,793
              )**Total
                  shareholders’ equity in accordance with U.S. GAAP**
              
              **$**
              **14,872**
              
              **$**
              **8,771****Total
                  shareholders’ equity and liabilities in accordance with U.S.
                  GAAP**
              
              **$**
              **29,621**
              
              **$**
              **29,119**




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





**Mar 31,**
              **2008**
            
            **Dec 31,**
              **2007**Share
                capital
            
            $
            167,862
            
            $
            165,790Note
                warrants
            
            
            2,234
            
            
            2,292Contributed
                surplus
            
            
            41,290
            
            
            39,463Deficit
            
            
            (196,514
            )
            
            (198,774
            )**Total
                shareholders’ equity in accordance with U.S. GAAP**
            
            **$**
            **14,872**
            
            **$**
            **8,771**





22




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)





**15.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**





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





**Three months ended**
              **March 31,****2008**
            
            **2007**Net
                income (loss) for the period, based on Canadian GAAP
            
            $
            3,654
            
            $
            (4,647
            )Financing
                costs (a)
            
            
            (53
            )
            
            –Amortization
                of deferred gain (b)(i)
            
            
            (555
            )
            
            (71
            )Change
                in depreciation of property, plant and equipment (b)(ii)
            
            
            53
            
            
            44Capitalized
                deferred stripping and amortization (b)(iii)
            
            
            1,058
            
            
            (2,149
            )Black
                Fox development costs (c)
            
            
            (1,195
            )
            
            (678
            )Convertible
                debentures (d)
            
            
            (1,330
            )
            
            (5,319
            )Income
                taxes (e)
            
            
            628
            
            
            –Net
                income (loss) for the period based on U.S. GAAP
            
            $
            2,260
            
            $
            (12,820
            )Comprehensive
                income (loss) based on U.S. GAAP
            
            $
            2,260
            
            $
            (12,820
            )Basic
                and diluted net income (loss) per share in accordance with U.S.
                GAAP
            
            $
            0.01
            
            $
            (0.10
            )





Under
      U.S. GAAP, the consolidated statements of cash flows would be adjusted as
      follows:


**Three months ended**
                **March 31,****2008**
              
              **2007**Cash
                  provided by (used in) operating activities based on Canadian
                  GAAP
              
              $
              902
              
              $
              (2,382
              )Equity
                  accounting for investment in Montana Tunnels joint venture
                  (b)(i)
              
              
              (4,824
              )
              
              (966
              )Black
                  Fox development costs (c)
              
              
              (1,195
              )
              
              (678
              )Cash
                  used in operating activities based on U.S. GAAP
              
              
              (5,117
              )
              
              (4,026
              )Cash
                  used in investing activities based on Canadian GAAP
              
              
              (1,314
              )
              
              (5,520
              )Equity
                  accounting for investment in Montana Tunnels joint venture
                  (b)(i)
              
              
              677
              
              
              2,727Black
                  Fox development costs (c)
              
              
              1,195
              
              
              678Restricted
                  cash for Canadian flow-through expenditures (e)
              
              
              745
              
              
              75Cash
                  provided by (used in) investing activities based on U.S.
                  GAAP
              
              
              1,303
              
              
              (2,040
              )Cash
                  provided by financing activities based on Canadian GAAP
              
              
              (1,558
              )
              
              10,883Equity
                  accounting for investment in Montana Tunnels joint venture
                  (b)(i)
              
              
              4,139
              
              
              (1,884
              )Cash
                  provided by financing activities based on U.S. GAAP
              
              
              2,581
              
              
              8,999Effect
                  of exchange rate changes on cash
              
              
              (14
              )
              
              (4
              )Net
                  cash (outflow) inflow in accordance with U.S. GAAP
              
              
              (1,247
              )
              
              2,929Cash,
                  beginning of period in accordance with U.S. GAAP
              
              
              1,334
              
              
              3,718Cash,
                  end of period in accordance with U.S. GAAP
              
              $
              87
              
              $
              6,647
 23





**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)





**15.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**





***(a)***
            Financing
                costs




As
      of
      January 1, 2007, under Canadian GAAP, the Company expenses debt financing costs
      when they are incurred. Under U.S. GAAP, debt financing costs are capitalized
      and amortized over the term of the related debt.




***(b)***
            Montana
                Tunnels




*(i)*  Joint
      venture




Under
      Canadian GAAP, the Company has accounted for its joint venture interest in
      the
      Montana Tunnels mine (“MTM”) using the proportionate consolidation method
      whereby the Company’s proportionate share of each line item of MTM’s assets,
      liabilities, revenues and expenses is included in the corresponding line item
      of
      the Company's financial statements (Note 4).  Under U.S. GAAP, the Company
      would account for MTM using the equity method whereby the Company's share of
      the
      investee’s earnings and losses is included in operations and its investments
      therein are adjusted by a similar amount.  The carrying value of MTM was
      lower under U.S. GAAP than under Canadian GAAP following an impairment of the
      property, plant and equipment in prior years and as a result the gain on
      transfer of the Company's interest in MTM into the joint venture under U.S.
      GAAP
      is higher. Under U.S. GAAP the gain on transfer of the Company's interest in
      MTM
      into the joint venture was included in the net loss for the year ended December
      31, 2006; whereas under Canadian GAAP it was deferred and is recognized as
      an
      adjustment to net income using the units-of-production method over the expected
      life of mine based on the recoverable gold equivalent ounces. The adjustments
      to
      reconcile between Canadian GAAP and U.S. GAAP for Montana Tunnels have been
      presented separately rather than being presented as a single equity accounting
      adjustment.  The Company believes that this presentation provides more
      detailed information to a reader of the financial statements enabling the reader
      to reconcile the individual adjustments to the primary Canadian GAAP financial
      statements and footnotes.




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




Under
      Canadian GAAP, write-downs for impairment of property, plant and equipment
      are
      determined using current proven and probable reserves and mineral resources
      expected to be converted into mineral reserves. In 2002, under U.S. GAAP,
      write-downs were determined using current proven and probable reserves.
      Accordingly, for U.S. GAAP purposes, an impairment of property, plant and
      equipment and an adjustment to the related depreciation has been
      recorded.




*(iii)*  Deferred
      stripping costs




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




***(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.
      Accordingly, for U.S. GAAP purposes, a cumulative reduction
      in property, plant and equipment of $28.0 million has been recorded as at March
      31, 2008 and an additional expense of $1.2 million has been recorded for the
      three months then ended.




24





**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)





**15.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**




On
      April
      14, 2008, the Company filed a Canadian National Instrument 43-101 prepared
      to
      U.S. standards. Therefore, effective April 2008, under U.S. GAAP, mining
      development costs at the Black Fox Project will be capitalized.




***(d)***
            Convertible
                debenture




Under
      Canadian GAAP, the Series 2007-A convertible debentures were recorded as a
      compound financial instrument including detachable note warrants. On issuance,
      under U.S. GAAP, the detachable note warrants are 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 features
      determined using the effective conversion prices based on the proceeds allocated
      to the convertible debentures 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.




***(e)***
            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.




The
      Financial Accounting Standards Board ("FASB") staff has taken the view that
      under SFAS No. 109, *Accounting
      for Income Taxes* ,
      the
      proceeds from issuance should be allocated between the offering of shares and
      the sale of tax benefits. The allocation is made based on the difference between
      the quoted price of the existing shares and the amount the investor pays for
      the
      shares. A liability is  recognized
      for this difference.  The
      liability is reversed when tax benefits are renounced and a deferred tax
      liability is recognized at that time. Income tax expense is the difference
      between the amount of a deferred tax liability and the liability recognized
      on
      issuance.




Also,
      notwithstanding whether there is a specific requirement to segregate the funds,
      the flow-through funds which are unexpended at the consolidated balance sheet
      dates are considered to be restricted and are not considered to be cash or
      cash
      equivalents under U.S. GAAP. As at March 31, 2008, unexpended flow-through
      funds
      were $2.5  million
      (December 31, 2007 - $3.2 million).




***(f)***
            Income
                taxes




While
      tax
      accounting rules are essentially the same under both U.S. and Canadian GAAP,
      tax
      account differences can arise from differing treatment of various assets and
      liabilities. For example, certain mine developments cost are capitalized under
      Canadian GAAP and expensed under U.S. GAAP, as explained in (c) above. An
      analysis of these differences indicates that there are larger potential tax
      benefits under U.S. GAAP than under Canadian GAAP but a valuation allowance
      has been applied to all the financial statement recognition and measurement
      of a
      tax position taken or expected to be taken in a tax return. FIN 48 requires
      that
      the Company recognize in its consolidated financial statements, only those
      tax
      positions that are “more-likely-than-not” of being sustained as of the adoption
      date, based on the technical merits of the position.




25





**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)





**15.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**




Under
      current conditions and expectations, the Company does not foresee any
      significant changes in unrecognized tax benefits that would have a material
      impact on the Company’s financial statements. The Company and/or one of its
      subsidiaries are subject to the following material taxing jurisdictions: United
      States and Canada. The Company is generally not subject to examinations that
      could create a tax liability for tax years before 2004 by the Internal Revenue
      Service and before 2001 by Revenue Canada. The Company recognizes interest
      accrued related to unrecognized tax benefits in interest expense and penalties
      in operating expenses. The Company has no accrued interest or penalties related
      to uncertain tax positions as of March 31, 2008.




***(g)***
            Recently
                issued accounting pronouncements




In
      September 2006, the FASB issued SFAS No. 157, *Fair
      Value Measurements* (“SFAS
      157”). This statement defines fair value, establishes guidelines for measuring
      fair value and expands disclosures regarding fair value measurements. SFAS
      157
      does not require any new fair value measurements but rather eliminates
      inconsistencies in guidance found in various prior accounting pronouncements.
      The
      provisions of SFAS 157 were adopted January 1, 2008. The adoption of SFAS 157
      did not have a material impact on the Company’s financial position, results of
      operations or cash flows.


In
      February 2007, the FASB issued SFAS 159, *The
      Fair Value Option for Financial Assets and Liabilities – Including an amendment
      of FASB Statement No. 115* (“SFAS
      159). ** SFAS 159
      permits entities to choose to measure certain financial assets and liabilities
      at fair value (the “fair value option”). Unrealized gains and losses, arising
      subsequent to adoption, are reported in earnings. The provisions of SFAS 159
      were adopted January 1, 2008. The Company did not elect the Fair Value Option
      for any of its financial assets or liabilities, and therefore, the adoption
      of
      SFAS 159 had no impact on the Company’s financial position, results of
      operations or cash flows.





In
      December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
      Combinations (“SFAS 141(R)”). SFAS 141(R) establishes principles and
      requirements for how an acquirer recognizes and measures in its financial
      statements the identifiable assets acquired, the liabilities assumed, any
      noncontrolling interest in the acquiree and the goodwill acquired.
      SFAS 141(R) also establishes disclosure requirements to enable the
      evaluation of the nature and financial effects of the business combination.
      SFAS 141(R) is effective for fiscal years beginning after December 15,
      2008. The Company is currently evaluating the potential impact, if any, of
      the
      adoption of SFAS 141(R) on its consolidated financial
      statements.





In
      December 2007, the FASB issued SFAS No. 160, *Noncontrolling
      Interests in Consolidated Financial Statements—an amendment of Accounting
      Research Bulletin No. 51* (“SFAS 160”). SFAS 160 establishes accounting and reporting standards
      for ownership interests in subsidiaries held by parties other than the parent,
      the amount of consolidated net income attributable to the parent and to the
      noncontrolling interest,
      changes in a parent’s ownership interest, and the valuation of retained
      noncontrolling equity investments when a subsidiary is deconsolidated.
      SFAS 160 also establishes disclosure requirements that clearly identify and
      distinguish between the interests of the parent and the interests of the
      noncontrolling owners. SFAS 160 is effective for fiscal years beginning
      after December 15, 2008. The Company is currently evaluating the potential
      impact, if any, of the adoption of SFAS 160 on its consolidated financial
      statements.




26




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Three
      month period ended March 31, 2008**


(Stated
      in U.S. dollars; tabular amounts in thousands except share and per share
      data)


(Unaudited)





**15.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**




In
      March
      2008, the FASB issued Statement No. 161, *Disclosures
      about Derivative Instruments and Hedging Activities.* The
      new
      standard is intended to improve financial reporting about derivative instruments
      and hedging activities by requiring enhanced disclosures to enable investors
      to
      better understand their effects on an entity’s financial position, financial
      performance, and cash flows. It is effective for financial statements issued
      for
      fiscal years and interim periods beginning after November 15, 2008, with
      early application encouraged. The Company is currently evaluating the impact
      of
      this standard on its consolidated financial statements.





**16.**
            **SUBSEQUENT
                EVENT**




On
      April
      26, 2008, the Company filed a Registration Statement on Form S-3 with the
      Securities and Exchange Commission (the “SEC”), declared effective by the SEC on
      May 7, 2008, that allows the Company to sell, from time to time, up to $100
      million of its debt securities, common stock and warrants in one or more
      offerings. The Company is not required to offer or sell all or any portion
      of
      the Securities in the future under the registration statement and will do so
      only if market conditions warrant. The terms of any offering under the
      registration statement will be established at the time of such offering.




27


**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 15 to the attached consolidated financial
      statements.




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




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




**BACKGROUND
      AND RECENT DEVELOPMENTS**




We
      are
      principally engaged in gold mining including extraction, processing, refining
      and the production of other co-product metals, as well as related activities
      including exploration and development of mineral deposits principally in North
      America. We are the operator of the Montana Tunnels mine (the “Mine”), which is
      a 50% joint venture with Elkhorn Tunnels, LLC (“Elkhorn”). The Mine is an open
      pit mine and mill located near Helena, Montana, which produces gold doré and
      lead-gold and zinc-gold concentrates. On July 28, 2006, we entered into a joint
      venture agreement with Elkhorn in respect of the Mine, pursuant to which Elkhorn
      was granted a 50% interest in the Mine in exchange for financial
      contributions.




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




**Corporate**





On
      April
      26, 2008, we filed a Registration Statement on Form S-3 with the Securities
      and
      Exchange Commission (the “SEC”), declared effective by the SEC on May 7, 2008,
      that allows us to sell, from time to time, up to $100 million of our debt
      securities, common stock and warrants (the “Securities”) in one or more
      offerings. We are not required to offer or sell all or any portion of the
      Securities in the future under the registration statement and will do so only
      if
      market conditions warrant. The terms of any offering under the registration
      statement will be established at the time of such offering.





**Montana
      Tunnels**





During
      the first quarter 2008, approximately 2,255,000 tons were mined, of which
      1,982,000 tons were ore. The mill processed 1,227,000 tons of ore at an average
      throughput of 13,500 tons per day for the quarter and there was an increase
      in
      the ore stockpiled at the mill site of approximately 750,000 tons of ore during
      the quarter. As at March 31, 2008 the ore stockpile sitting alongside the mill
      was 1,260,000 tons. Payable production was 13,900 ounces of gold, 170,000 ounces
      of silver, 4,249,000 lbs of lead and 8,864,000 lbs of zinc. Apollo’s share of
      this production is 50%.





**Grade:**
            
            
            
            **Recoveries:**Au
                ounces per ton
            
            0.0157
            
            Au
            
            81.40%Ag
                ounces per ton
            
            0.1730
            
            Ag
            
            83.52%Pb
                %
            
            0.2300
            
            Pb
            
            80.70%Zn
                %
            
            0.6400
            
            Zn
            
            82.50%




28




Total
      cash costs for the first quarter 2008 on a by-product basis were minus $3 per
      ounce of gold and on a co-product basis they were $561 per ounce of gold, $8.20
      per ounce of silver, $0.81 per lb of lead and $0.62 per lb of zinc.





During
      the first quarter 2008, the joint venture spent $0.2 million on capital
      expenditures. Apollo’s share of these capital expenditures is 50%. Also in the
      first quarter 2008, the joint venture distributed $7.9 million to its
      principals, 55% of which went to Elkhorn and 45% of which went to
      Apollo.





On
      April
      27, 2008, we shut down the ball mill after a crack in the ball mill was
      discovered. Repairs to the ball mill will take approximately three weeks. Mine
      crews are expected to be idle during the second two weeks of the repairs. We
      had
      approximately 12 days of concentrate production in stock awaiting shipment
      at
      the time of the discovery. The mill is scheduled to restart operations in the
      week commencing May 19, 2008.





**Black
      Fox**





On
      February 29, 2008, we announced a new probable reserve statement that
      incorporates the results of the infill drilling program, which shows a new
      probable reserve of 1,330,000 ounces of gold, an increase of 328,000 ounces,
      based on a gold price of $650 per ounce. The Canadian Instrument, NI 43-101,
      prepared to a bankable standard (“bankable feasibility study”), was filed on
      April 14, 2008. A bankable feasibility study is a comprehensive analysis of
      a
      project’s economics (+/- 15% precision) used by the banking industry for
      financing purposes. The table below summarizes the Black Fox Total Mineral
      Reserve.





**Black
      Fox Probable Reserve Statement as of February 29, 2008**




**Mining Method**
            
            **Cutoff Grade**
              **Au g/t**
            
            **Tonnes**
              **(000)**
            
            **Grade**
              **Au g/t**
            
            **Contained**
              **Au Ounces**Open
                Pit
            
            
            1.0
            
            
            4,350
            
            
            5.2
            
            
            730,000Underground
            
            
            3.0
            
            
            2,110
            
            
            8.8
            
            
            600,000**Total
                Probable Reserves**
            
            
            
            
            
            
            
            
            
            
            
            **1,330,000**





On
      March
      26, 2008, we announced that we had signed a non-binding letter of intent
      pursuant to which St Andrew will sell its Stock Mine property, including its
      mill and related equipment, infrastructure, laboratory and tailings facilities,
      located near Timmins, Ontario, to us for a purchase price of $20 million and
      the
      assumption of certain related liabilities. The purchase price will be paid
      in
      two installments, with the first installment of Cdn$1.5 **** million
      to be paid on execution of a definitive asset purchase agreement and with the
      balance to be paid at the closing of the acquisition , which is expected to
      occur on or about June 30, 2008. We will also be responsible for the refund
      to
      St Andrew of its bonding commitment at the Stock Mine of approximately $1.2
      million. The Stock Mill was in operation until May 2007 and processed, in the
      past, approximately 1 million tonnes of ore from the Glimmer mine, the former
      mining operation situated at the current location of the Black Fox deposit.
      Completion of the transaction is subject to satisfactory completion of due
      diligence and Board approval by Apollo Gold, Board approval by St Andrew, the
      negotiation and execution of definitive agreements, regulatory approval and
      other customary conditions. Completion of the acquisition cannot be assessed
      or
      guaranteed.




**Huizopa
      Project**




During
      the first quarter 2008, we commenced a helicopter assisted core drilling program
      on two identified targets at its Huizopa project. At March 31, 2008, twelve
      core
      holes had been completed and assays were expected during the second quarter
      2008.




**Production
      & Metals Price Averages**




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




29




**Three months**
              **ended**
              **March 31,**
              **2008**
            
            **Three months**
              **ended**
              **March  31,**
              **2007 (1)****Metal
                Sales:**Gold
                (ounces)
            
            
            6,933
            
            
            1,161Silver
                (ounces)
            
            
            85,048
            
            
            24,189Lead
                (pounds)
            
            
            2,124,695
            
            
            503,977Zinc
                (pounds)
            
            
            4,431,797
            
            
            925,015Total
                revenue ($millions)
            
            $
            15.9
            
            $
            2.9**Total
                cash and production costs on a by-product basis:**Total
                cash costs per ounce of gold
            
            $
            (3
            )
            $
            (270
            )Total
                production costs per ounce of gold
            
            $
            132
            
            $
            (174
            )**Total
                cash costs on a co-product basis:**Total
                cash costs per ounce of gold
            
            $
            561
            
            $
            418Total
                cash costs per ounce of silver
            
            $
            8.20
            
            $
            8.41Total
                cash costs per pound of lead
            
            $
            0.81
            
            $
            0.55Total
                cash costs per pound of zinc
            
            $
            0.62
            
            $
            0.95**Average
                metal prices:**Gold
                - London bullion mkt. ($/ounce)
            
            $
            927
            
            $
            656Silver
                - London bullion mkt. ($/ounce)
            
            $
            17.68
            
            $
            13.18Lead
                - LME ($/pound)
            
            $
            1.31
            
            $
            0.81Zinc
                - LME ($/pound)
            
            $
            1.10
            
            $
            1.57





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




**($ in thousands)**
            
            **Three months**
              **ended**
              **March 31,**
              **2008**
            
            **One month**
              **ended**
              **March 31,**
              **2007 (1)**Gold
                ounces sold
            
            
            6,933
            
            
            1,161Direct
                operating costs
            
            $
            9,059
            
            $
            1,816Less:      
                Mining taxes, royalty expenses
            
            
            491
            
            
            85By-product
                credits
            
            
            9,079
            
            
            2,129Cash
                operating cost
            
            
            (511
            )
            
            (398
            )Cash
                operating cost per ounce of
                gold
            
            **$**
            **(74**
            **)**
            **$**
            **(343**
            **)**Cash
                operating costs
            
            
            (511
            )
            
            (398
            )Add:     
                 Mining taxes, royalty expenses
            
            
            491
            
            
            85Total
                cash costs
            
            
            (20
            )
            
            (313
            )Total
                cash cost per ounce of
                gold
            
            **$**
            **(3**
            **)**
            **$**
            **(270**
            **)**Total
                cash costs
            
            
            (20
            )
            
            (313
            )Add:     
                 Depreciation & amortization (operations only)
            
            
            934
            
            
            111Total
                production costs
            
            
            914
            
            
            (202
            )Total
                production cost per ounce
                of gold
            
            **$**
            **132**
            
            **$**
            **(174**
            **)**





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




30




**MATERIAL
      CHANGES IN RESULTS OF OPERATIONS**




***Three
      Months Ended*** **March
      31, 2008 Compared to the Three Months Ended March 31, 2007**




**Revenue
      from the Sale of Minerals.**




Revenue
      for the three months ended March 31, 2008 increased 450% to $15.9
      million  from
      $2.9
      million for the same period in 2007.  Production
      in the first quarter of 2007 only includes the month of March as milling was
      restarted on March 1, 2007, after being shut down since May of 2006. Revenues
      also benefited from higher prevailing metal prices with gold, lead and silver
      being 43%, 62% and 33%, respectively, higher than in the first quarter 2008
      compared to the first quarter 2007. The prevailing price of zinc was 30% lower
      in the first quarter 2008 compared to the first quarter 2007.




**Operating
      Expenses.**




*Direct
      Operating Costs.* ** Direct
      operating costs, which includes mining costs, processing costs and smelting
      and
      refining charges, for the three months ended March 31, 2008  increased
      196% to $9.1 million  from
      $3.1
      million for the three months ended March 31, 2007.  This
      increase is a direct result of a full three months of production in the first
      quarter of 2008 compared to just one month of production in the first quarter
      of
      2007 as the mill was restarted on March 1, 2007 after being shut down since
      May
      of 2006.




*Depreciation
      and Amortization.* Depreciation and amortization expenses were $0.4 million and $0.3 million for
      the three months ended March 31, 2008 and 2007, respectively.




*General
      and Administrative Expenses.* General
      and administrative expenses were $0.9 million and $1.1 million  for
      the
      three months ended March 31, 2008 and 2007, respectively.




*Accretion
      Expense – Accrued Site Closure Costs.* Accrued
      accretion expense was $0.2 million for the three months ended March 31, 2008
      compared to $0.1 million for the same period in 2007.





*Amortization
      of Deferred Gain.* Amortization
      of deferred gain relating to the transfer of assets and liabilities to Montana
      Tunnels joint venture was $0.6 million for the three months ended March 31,
      2008
      compared to $0.1 million for the same period in 2007.





*Exploration
      and Business Development Expense* *.* Expenses
      for exploration and development, consisting of drilling and related land
      expenses mainly at our Huizopa project in Mexico, totaled $0.8 million and
      $1.6
      million for the three months ended March 31, 2008 and 2007, respectively.




*Total
      Operating Expenses* .
      As a
      result of these expense components, our total operating expenses  increased
      78% to $10.8 million for the three months ended March 31, 2008, from $6.1
      million for the three months ended March 31, 2007.




**Other
      Income (Expenses).**




*Interest
      Income and Interest Expense.* We
      realized interest income of $0.1 million and interest expense of $1.1 million
      during the three months ended March 31, 2008 compared to $0.2 million in
      interest income and $1.1 million in interest expense during the three months
      ended March 31, 2007.




*Financing
      Costs.* Financing
      costs during the three months ended March 31, 2008 were nil, compared to $0.5
      million for the same period in 2007. The 2007 costs relate to the Series 2007-A
      convertible debentures that were issued in February 2007.





**Net
      Income (Loss).**




As
      a
      result of the foregoing, the Company recorded net income of $3.7 million, or
      $0.02 per share, for the three months ended March 31, 2008, as compared to
      a net
      loss of $4.6 million, or $0.03 per share, for the three months ended March
      31,
      2007.




**MATERIAL
      CHANGES IN LIQUIDITY**




To
      date,
      we have funded our operations primarily through issuances of debt and equity
      securities and funding from joint venture partners. At March 31, 2008, we had
      cash of $2.9 million, compared to cash of $4.9 million at December 31, 2007.
      The
      decrease in cash since December 31, 2007 is primarily the result of financing
      cash outflows of $1.6 million and investing cash outflows of $1.3 million,
      partially offset by operating cash inflows of $0.9 million.




31




During
      the three months ended March 31, 2008, net cash used in investing activities
      totaled $1.3 million. Capital expenditures for property, plant and equipment
      of
      $1.3 million include $1.2 million for the further development of the Black
      Fox
      Project and $0.1 million spent at Montana Tunnels. Other investing activities
      include cash outflows of $0.6 million for the funding of the Montana Tunnels
      reclamation liability and cash inflows of $0.5 million from settlement of lead
      and zinc derivative contracts that matured at the end of March.




During
      the three months ended March 31, 2008, cash used in financing activities was
      $1.6 million. Payments of notes payable accounted for cash outflows of $3.0
      million. Cash inflows of financing activities included the exercise of 3.3
      million warrants at an average exercise price of $0.43 per common share for
      proceeds of $1.4 million.




We
      estimate that with our March 31, 2008 cash balance of $2.9 million and the
      projected cash flows from the Montana Tunnels mine joint venture, we will have
      sufficient funds to finance the current 2008 work programs of $2.2 million
      at
      Black Fox and $1.6 million for exploration at Huizopa, as well as corporate
      overhead. However, with the completion of the feasibility study at Black Fox
      and
      our proposed acquisition of St Andrew Goldfield’s stock mill located near our
      Black Fox Project, we are exploring financing opportunities to further develop
      the Black Fox Project, pay for the proposed acquisition of the stock mill and
      expand the 2008 work program at Black Fox, which may include project financing
      at Black Fox, the issuance of equity, and flow-through financing. The
      availability, amount, terms and timing of future financings are not certain
      at
      this time.




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




**MATERIAL
      CHANGES IN CONTRACTUAL OBLIGATIONS**




None.




**MATERIAL
      CHANGES IN OFF BALANCE SHEET ARRANGEMENTS**




None.




**ENVIRONMENTAL**




The
      Company’s current environmental liabilities are at Montana Tunnels and Black
      Fox. As of March 31, 2008, we have accrued $9.6 million related to reclamation,
      an increase of $0.2 million from December 31, 2007. These liabilities are
      covered by a combination of surety bonds, restricted cash and property totaling
      $18.7 million at March 31, 2008. We have accrued the present value of
      management’s estimate of the liability as of March 31, 2008.




**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 15 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.




32




For
      other
      critical accounting policies, please refer to those disclosed in our 10-K filing
      for the year ended December 31, 2007 and to the changes in accounting policies
      described below.




**CHANGES
      IN ACCOUNTING POLICIES**




During
      the quarter, the Company adopted three new presentation and disclosure standards
      that were issued by the Canadian Institute of Chartered Accountants: Handbook
      Section 1535, *Capital
      Disclosures* (“Section 1535”), Handbook Section 3862, *Financial
      Instruments – Disclosures* (“Section 3862”) and Handbook Section 3863, *Financial
      Instruments – Presentation* (“Section 3863”). Section 1535 requires the disclosure of both qualitative and
      quantitative information that enables users of financial statements to evaluate
      (i) an entity’s objectives, policies and processes for managing capital; (ii)
      quantitative data about what the entity regards as capital; (iii) whether the
      entity has complied with any capital requirements; and (iv) if it has not
      complied, the consequences of such non-compliance. Sections 3862 and 3863
      replace Handbook Section 3861, Financial Instruments – Disclosure and
      Presentation, revising and enhancing its disclosure requirements and carrying
      forward unchanged its presentation requirements for financial instruments.
      Sections 3862 and 3863 place increased emphasis on disclosures about the nature
      and extent of risks arising from financial instruments and how the entity
      manages those risks.





During
      the quarter, the Company adopted Handbook Section 3031 – *Inventories* ,
      which
      replaces the former Section 3030 – *Inventories* .
      Section
      3031 establishes standards for the measurement and disclosure of inventories,
      including the measurement of inventories at the lower of cost and net realizable
      value, consistent use of either first-in, first-out (FIFO) or weighted average
      cost formulas and the reversal of inventory write-downs previously recognized.
      The Company has applied the new standard prospectively. The adoption of Section
      3031 on January 1, 2008, did not have a material impact on the Company’s
      financial condition or operating results.





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




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




**Interest
      Rate Risk**




We
      currently have minimal debt and thus no material interest rate exposure related
      to debt. We typically invest excess cash in high quality short-term debt
      instruments. The rates received on such investments 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 2008, a one percent change in interest rates
      would
      not materially impact our annual income. We may in the future actively manage
      our exposure to interest rate risk.




**Foreign
      Currency Exchange Rate Risk**




While
      the
      majority of our transactions are denominated in U.S. dollars, certain purchases
      of labor, operating supplies and capital assets are denominated in Canadian
      dollars and Mexican pesos. The appreciation of non-US dollar currencies against
      the US dollar increases the costs of goods and services purchased in non-US
      dollar terms, which can adversely impact our net income and cash flows.
      Conversely, a depreciation of non-US dollar currencies against the US dollar
      usually decreases the costs of goods and services purchased in US dollar terms.




The
      value
      of cash and cash equivalent investments denominated in foreign currencies also
      fluctuates with changes in currency exchange rates. Appreciation of non-US
      dollar currencies results in a foreign currency gain on such investments and
      a
      decrease in non-US dollar currencies results in a loss.




33




**Commodity
      Price Risk**






The
      profitability of the Company’s operations will be dependent upon the market
      price of gold. Gold prices fluctuate widely and are affected by numerous factors
      beyond the control of the Company. The level of interest rates, the rate of
      inflation, the world supply of gold and the stability of exchange rates can
      all
      cause significant fluctuations in prices. Such external economic factors are
      in
      turn influenced by changes in international investment patterns, monetary
      systems and political developments. The price of gold has fluctuated widely
      in
      recent years, and future price declines could cause some projects to become
      uneconomic, thereby having a material adverse effect on the Company’s business
      and financial condition. We have entered into derivative contracts to protect
      the selling price for certain anticipated lead and zinc production through
      September 30, 2008 and we may in the future more actively manage our exposure
      through additional hedging programs.




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




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




**Equity
      Price Risk**




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




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




**Disclosure
      Controls and Procedures**




Our
      principal executive officer and principal financial officer have evaluated
      the
      effectiveness of our disclosure controls and procedures (as defined in
      Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
      1934, as amended (the “Exchange Act”) as of March 31, 2008. Based on the
      evaluation, our principal executive officer and principal financial officer
      concluded that the disclosure controls and procedures in place are effective
      to
      ensure that information required to be disclosed by us, including consolidated
      subsidiaries, in reports that we file or submit under the Exchange Act, is
      recorded, processed, summarized and reported on a timely basis in accordance
      with applicable time periods specified by the Securities and Exchange Commission
      rules and forms, and ensure that information required to be disclosed by us
      in the reports that we file under the Securities Exchange Act is accumulated
      and
      communicated to our management, including our principal executive officer and
      principal financial officer, as appropriate to allow timely decisions regarding
      required financial disclosure.




**Changes
      in Internal Control**




There
      has
      been no change in our internal control over financial reporting during the
      quarter ended March 31, 2008, that has materially affected, or is reasonably
      likely to materially affect, the Company’s internal control over financial
      reporting.




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




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




In
      May
      2006, a purported class action lawsuit was filed in U.S. Federal Court Missoula
      Division of Montana by 14 former employees at our Montana Tunnels mine alleging
      (i) violations of the Worker Adjustment and Retraining Notification Act of
      1988
      (the “WARN Act”) and the Montana Wage Act and (ii) breach of contract. The
      allegations relate to the termination of the employees following the cessation
      of mining in October 2005. Specifically, the plaintiffs allege that we gave
      deficient WARN Act notice and are seeking damages for back pay and benefits.
      A
      negotiated settlement was tentatively reached between us and the plaintiffs
      and
      is expected to be finalized later in 2008. We believe the resolution of this
      matter will not have a material impact on our financial statements.




34




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




None.




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




None.




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




None.




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




None.




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




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





35


**SIGNATURES**




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




**APOLLO
                GOLD CORPORATION**Date:   May
                12, 2008
            
            */*s*/
                R. David Russell*R.
                David Russell, President andChief
                Executive OfficerDate:   May
                12, 2008
            
            */*s*/
                Melvyn Williams*Melvyn
                Williams,Chief
                Financial Officer and Senior Vice President Finance
              and
                Corporate Development





36


**Index
      to Exhibits**





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




37