**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





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


**SECURITIES
      EXCHANGE ACT OF 1934**





For
      the
      quarterly period ended September 30, 2007





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 x No o





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





Large
                Accelerated Filero
            Accelerated
                Filero
            Non-Accelerated
                Filerx





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


Yes o No x





At
      November 9, 2007, there were 156,248,123  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 September 30, 2007 and as of
                  December 31, 2006
              5Condensed
                  Consolidated Statements of Operations and Comprehensive Income
                  (Loss) for
                  the Three and Nine Months Ended September 30, 2007 and
                  2006
              6Condensed
                  Consolidated Statements of Shareholders’ Equity for the Year ended
                  December 31, 2006 and the Nine Months Ended September 30,
                  2007
              7Condensed
                  Consolidated Statements of Cash Flows for the Three and Nine Months
                  Ended
                  September 30, 2007 and 2006
              8Notes
                  to the Condensed Consolidated Financial Statements
              9ITEM
                  2.
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                  OPERATIONS
              28ITEM
                  3.
              QUANTITATIVE
                  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
              36ITEM
                  4.
              CONTROLS
                  AND PROCEDURES
              37PART
                  II
              OTHER
                  INFORMATION
              38ITEM
                  1.
              LEGAL
                  PROCEEDINGS
              38ITEM
                  1A.
              RISK
                  FACTORS
              38ITEM
                  2.
              UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
              38ITEM
                  3.
              DEFAULTS
                  UPON SENIOR SECURITIES
              39ITEM
                  4.
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              39ITEM
                  5.
              OTHER
                  INFORMATION
              39ITEM
                  6.
              EXHIBITS
              39INDEX
                  TO EXHIBITS
              41Certification
                  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:




·
            future
                cash flow and operational results from the Montana Tunnels
                mine;




2


·
            the
                establishment and estimates of mineral reserves and
                resources;




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




·
            production
                and production costs;




·
            daily
                production rates;




·
            throughput
                rates;




·
            cash
                operating costs;




·
            total
                cash costs;




·
            grades
                of ore mined and milled;




·
            expenditures;




·
            exploration;




·
            permits;




·
            expansion
                plans;




·
            plans
                for Black Fox and Huizopa;




·
            closure
                costs;




·
            cash
                flows;




·
            future
                financing;




·
            liquidity;




·
            estimates
                of environmental liabilities;




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




·
            anticipated
                exploration, development and corporate overhead
                expenditures;




·
            factors
                impacting our results of
                operations;




·
            the
                impact of adoption of new accounting
                standards.




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




3


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




Apollo
      Gold Corporation prepares its consolidated financial statements in accordance
      with accounting principles generally accepted in Canada and publishes its
      financial statements in United States dollars. This Quarterly Report on Form
      10-Q should be read in conjunction with our condensed consolidated financial
      statements and related notes included in this quarterly report, as well as
      our
      annual financial statements for the fiscal year ended December 31, 2006
      included in our Annual Report on Form 10-K. Certain reclassifications have
      been
      made to the prior period financial statements to conform with the current period
      presentation.




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




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




**NON-GAAP
      FINANCIAL INFORMATION**




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




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




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




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




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




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




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




These
      condensed consolidated financial statements should be read in conjunction with
      the financial statements, accompanying notes and other relevant information
      included in the Company’s Annual Report on Form 10-K for the year ended
      December 31, 2006 filed with the Securities and Exchange Commission on
      April 2, 2007.




4


**APOLLO
      GOLD CORPORATION**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


(In
      thousands of U.S. dollars)


(Unaudited)





**September 30,**
              **2007**
            
            **December 31,**
              **2006****ASSETS**CURRENTCash
                and cash equivalents
            
            $
            6,637
            
            $
            4,512Accounts
                receivable and other
            
            
            2,304
            
            
            728Note
                receivable (Note 4)
            
            
            –
            
            
            1,865Prepaids
            
            
            713
            
            
            301Inventories
                (Note 5)
            
            
            1,476
            
            
            660Total
                current assets
            
            
            11,130
            
            
            8,066Property,
                plant and equipment
            
            
            44,484
            
            
            38,868Deferred
                stripping costs (Note 3)
            
            
            4,427
            
            
            –Restricted
                certificates of deposit
            
            
            6,097
            
            
            4,605Deferred
                financing costs
            
            
            –
            
            
            265TOTAL
                ASSETS
            
            $
            66,138
            
            $
            51,804**LIABILITIES**CURRENTAccounts
                payable
            
            $
            2,908
            
            $
            1,710Accrued
                liabilities
            
            
            2,611
            
            
            1,254Notes
                payable
            
            
            1,312
            
            
            671Property
                and mining taxes payable
            
            
            709
            
            
            442Convertible
                debentures
            
            
            8,598
            
            
            7,660Total
                current liabilities
            
            
            16,138
            
            
            11,737Accrued
                long-term liabilities
            
            
            133
            
            
            370Notes
                payable
            
            
            195
            
            
            569Convertible
                debentures (Note 6)
            
            
            4,676
            
            
            –Accrued
                site closure costs
            
            
            7,536
            
            
            7,135Deferred
                gain (Note 4)
            
            
            2,976
            
            
            3,750TOTAL
                LIABILITIES
            
            
            31,654
            
            
            23,561Continuing
                operations (Note 1)**SHAREHOLDERS’
                EQUITY**Share
                capital (Note 7)
            
            
            160,187
            
            
            159,029Equity
                component of convertible debentures (Note 6)
            
            
            4,047
            
            
            1,809Note
                warrants (Note 6)
            
            
            3,204
            
            
            1,062Contributed
                surplus
            
            
            12,228
            
            
            11,166Deficit
            
            
            (145,182
            )
            
            (144,823
            )TOTAL
                SHAREHOLDERS’ EQUITY
            
            
            34,484
            
            
            28,243TOTAL
                LIABILITIES AND SHAREHOLDERS’ EQUITY
            
            $
            66,138
            
            $
            51,804





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


5


**APOLLO
      GOLD CORPORATION**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS AND**


**COMPREHENSIVE
      INCOME (LOSS)**


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


(Unaudited)





**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Revenue
                from sale of minerals
            
            $
            11,863
            
            $
            372
            
            $
            27,594
            
            $
            10,177Operating
                expensesDirect
                operating costs
            
            
            7,285
            
            
            3,211
            
            
            18,280
            
            
            13,957Depreciation
                and amortization
            
            
            377
            
            
            324
            
            
            1,007
            
            
            1,282General
                and administrative expenses
            
            
            902
            
            
            1,123
            
            
            2,901
            
            
            3,594Accretion
                expense – accrued site closure costs
            
            
            126
            
            
            237
            
            
            380
            
            
            711Amortization
                of deferred gain (Note 4)
            
            
            (345
            )
            
            –
            
            
            (774
            )
            
            –Exploration
                and business development
            
            
            291
            
            
            188
            
            
            2,028
            
            
            788Loss
                on sale of property, plant and equipment
            
            
            –
            
            
            3
            
            
            –
            
            
            78,636
            
            
            5,086
            
            
            23,822
            
            
            20,339Operating
                income (loss)
            
            
            3,227
            
            
            (4,714
            )
            
            3,772
            
            
            (10,162
            )Other
                income (expenses)Interest
                income
            
            
            146
            
            
            99
            
            
            485
            
            
            253Interest
                expense (Note 8)
            
            
            (1,584
            )
            
            (726
            )
            
            (4,197
            )
            
            (1,939
            )Financing
                costs
            
            
            –
            
            
            –
            
            
            (480
            )
            
            –Foreign
                exchange gain (loss) and other
            
            
            33
            
            
            (29
            )
            
            31
            
            
            (42
            )Income
                (loss) from continuing operations before income taxes for the
                period
            
            
            1,822
            
            
            (5,370
            )
            
            (389
            )
            
            (11,890
            )Income
                taxes
            
            
            295
            
            
            –
            
            
            295
            
            
            –Income
                (loss) from continuing operations for the period
            
            
            2,117
            
            
            (5,370
            )
            
            (94
            )
            
            (11,890
            )Loss
                from discontinued operations for the period
            
            
            –
            
            
            –
            
            
            –
            
            
            (250
            )Net
                income (loss) and comprehensive income (loss) for the
                period
            
            $
            2,117
            
            $
            (5,370
            )
            $
            (94
            )
            $
            (12,140
            )Basic
                and diluted net income (loss) per share from:Continuing
                operations
            
            $
            0.01
            
            $
            (0.04
            )
            $
            0.00
            
            $
            (0.10
            )Discontinued
                operations
            
            
            –
            
            
            –
            
            
            –
            
            
            –$
            0.01
            
            $
            (0.04
            )
            $
            0.00
            
            $
            (0.10
            )Basic
                weighted-average number of shares outstanding
            
            
            143,922,308
            
            
            121,997,402
            
            
            143,358,591
            
            
            120,131,131Diluted
                weighted-average number of shares outstanding
            
            
            145,202,005
            
            
            121,997,402
            
            
            143,358,591
            
            
            120,131,131





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


6


**APOLLO
      GOLD CORPORATION**


**CONDENSED
      CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY**


(In
      thousands of U.S. dollars)


(Unaudited)


**Equity****Component****Share
                  Capital**
              
              **of****Number**
              
              
              
              **Convertible**
              
              **Note**
              
              **Contributed****of
                  Shares**
              
              **Amount**
              
              **Debentures**
              
              **Warrants**
              
              **Surplus**
              
              **Deficit**
              
              **Total**Balance,
                  December 31, 2005
              
              
              107,456,451
              
              $
              148,526
              
              $
              1,809
              
              $
              781
              
              $
              10,561
              
              $
              (129,236
              )
              $
              32,441Units
                  issued for cash
              
              
              11,650,000
              
              
              3,488
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              3,488Shares
                  issued for 2005 stock-based compensation
              
              
              2,290,408
              
              
              955
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              955Reduction
                  of exercise price of Note Warrants
              
              
              –
              
              
              –
              
              
              –
              
              
              305
              
              
              –
              
              
              –
              
              
              305Note
                  warrants exercised
              
              
              600,000
              
              
              264
              
              
              –
              
              
              (24
              )
              
              –
              
              
              –
              
              
              240Shares
                  issued for services
              
              
              1,325,000
              
              
              668
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              668Flow-through
                  units issued for cash
              
              
              2,222,221
              
              
              746
              
              
              –
              
              
              –
              
              
              27
              
              
              –
              
              
              773Units
                  issued for cash
              
              
              16,688,206
              
              
              4,357
              
              
              –
              
              
              –
              
              
              156
              
              
              –
              
              
              4,513Options
                  exercised
              
              
              50,000
              
              
              25
              
              
              –
              
              
              –
              
              
              (5
              )
              
              –
              
              
              20Stock-based
                  compensation
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              427
              
              
              –
              
              
              427Net
                  loss
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              (15,587
              )
              
              (15,587
              )Balance,
                  December 31, 2006
              
              
              142,282,286
              
              
              159,029
              
              
              1,809
              
              
              1,062
              
              
              11,166
              
              
              (144,823
              )
              
              28,243Change
                  in accounting policy (Note 3)
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              (265
              )
              
              (265
              )Balance
                  (as adjusted), January 1, 2007
              
              
              142,282,286
              
              
              159,029
              
              
              1,809
              
              
              1,062
              
              
              11,166
              
              
              (145,088
              )
              
              27,978Shares
                  issued for services
              
              
              20,000
              
              
              10
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              10Shares
                  issued for Huizopa settlement (Note 7(a)(i))
              
              
              1,000,000
              
              
              540
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              540Shares
                  issued for Black Fox mineral rights (Note 7(a)(ii))
              
              
              1,057,692
              
              
              527
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              527Income
                  tax benefits renounced to shareholders of flow-through units issued
                  in
                  2006 (Note 10)
              
              
              –
              
              
              (295
              )
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              (295
              )Equity
                  component of convertible debentures (Note 6)
              
              
              –
              
              
              –
              
              
              2,292
              
              
              –
              
              
              –
              
              
              –
              
              
              2,292Note
                  warrants (Note 6)
              
              
              –
              
              
              –
              
              
              –
              
              
              2,292
              
              
              –
              
              
              –
              
              
              2,292Debenture
                  compensation warrants (Note 6)
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              467
              
              
              –
              
              
              467Note
                  warrants exercised
              
              
              198,500
              
              
              229
              
              
              –
              
              
              (150
              )
              
              –
              
              
              –
              
              
              79Debentures
                  converted
              
              
              400,000
              
              
              147
              
              
              (54
              )
              
              –
              
              
              –
              
              
              –
              
              
              93Stock-based
                  compensation
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              595
              
              
              –
              
              
              595Net
                  loss and comprehensive loss
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              (94
              )
              
              (94
              )Balance,
                  September 30, 2007
              
              
              144,958,478
              
              $
              160,187
              
              $
              4,047
              
              $
              3,204
              
              $
              12,228
              
              $
              (145,182
              )
              $
              34,484





**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**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Operating
                activitiesNet
                income (loss) for the period
            
            $
            2,117
            
            $
            (5,370
            )
            $
            (94
            )
            $
            (12,140
            )Items
                not affecting cash:Depreciation
                and amortization
            
            
            377
            
            
            324
            
            
            1,007
            
            
            1,282Amortization
                of deferred stripping costs
            
            
            597
            
            
            –
            
            
            1,258
            
            
            0Amortization
                of deferred financing costs
            
            
            –
            
            
            80
            
            
            –
            
            
            239Financing
                costs
            
            
            –
            
            
            –
            
            
            174
            
            
            0Loss
                from discontinued operations
            
            
            –
            
            
            –
            
            
            –
            
            
            250Reduction
                in exercise price of Note Warrants
            
            
            –
            
            
            –
            
            
            –
            
            
            305Stock-based
                compensation
            
            
            208
            
            
            126
            
            
            595
            
            
            315Shares
                issued for services and settlement of claims
            
            
            –
            
            
            668
            
            
            550
            
            
            668Accretion
                expense – accrued site closure costs
            
            
            126
            
            
            237
            
            
            380
            
            
            711Accretion
                expense – convertible debenture
            
            
            1,052
            
            
            271
            
            
            2,523
            
            
            775Loss
                onsale of property, plant and equipment and other
            
            
            (2
            )
            
            24
            
            
            (2
            )
            
            64Amortization
                of deferred gain (Note 4)
            
            
            (345
            )
            
            –
            
            
            (774
            )
            
            –Income
                taxes
            
            
            (295
            )
            
            –
            
            
            (295
            )
            
            –Net
                change in non-cash operating working capital items (Note
                12)
            
            
            797
            
            
            470
            
            
            433
            
            
            (1,243
            )Discontinued
                operations
            
            
            –
            
            
            –
            
            
            –
            
            
            (250
            )Net
                cash provided by (used in) operating activities
            
            
            4,632
            
            
            (3,170
            )
            
            5,755
            
            
            (9,024
            )Investing
                activitiesProperty,
                plant and equipment expenditures
            
            
            (2,072
            )
            
            (591
            )
            
            (5,749
            )
            
            (5,029
            )Deferred
                stripping costs
            
            
            (1,937
            )
            
            –
            
            
            (5,685
            )
            
            –Proceeds
                from disposal of property, plant and equipment
            
            
            –
            
            
            –
            
            
            –
            
            
            92Restricted
                certificate of deposit and other assets
            
            
            (600
            )
            
            (525
            )
            
            (1,492
            )
            
            9,488Net
                cash (used in) provided by investing activities
            
            
            (4,609
            )
            
            (1,116
            )
            
            (12,926
            )
            
            4,551Financing
                activitiesProceeds
                on issuance of shares
            
            
            –
            
            
            –
            
            
            –
            
            
            3,488Proceeds
                on issuance of convertible debentures and note warrants,
                net
            
            
            –
            
            
            –
            
            
            8,062
            
            
            –Proceeds
                from exercise of warrants
            
            
            13
            
            
            240
            
            
            79
            
            
            240Proceeds
                from notes payable
            
            
            –
            
            
            309
            
            
            1,250
            
            
            309Payments
                of notes payable
            
            
            (475
            )
            
            (315
            )
            
            (1,960
            )
            
            (763
            )Funding
                by Elkhorn Tunnels, LLC
            
            
            –
            
            
            3,050
            
            
            1,865
            
            
            3,050Net
                cash (used in) provided by financing activities
            
            
            (462
            )
            
            3,284
            
            
            9,296
            
            
            6,324Net
                (decrease) increase in cash and cash equivalents
            
            
            (439
            )
            
            (1,002
            )
            
            2,125
            
            
            1,851Cash
                and cash equivalents, beginning of period
            
            
            7,076
            
            
            2,980
            
            
            4,512
            
            
            127Cash
                and cash equivalents, end of period (Note 12)
            
            $
            6,637
            
            $
            1,978
            
            $
            6,637
            
            $
            1,978SUPPLEMENTAL
                CASH FLOW INFORMATIONInterest
                paid
            
            $
            867
            
            $
            349
            
            $
            1,471
            
            $
            899Income
                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**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)




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




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




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




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




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




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




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




***(a)***  These
      unaudited consolidated interim financial statements have been prepared in
      accordance with Canadian generally accepted accounting principles (“Canadian
      GAAP”) and except as described in Note 14, conform in all material respects with
      accounting principles generally accepted in the United States (“U.S. GAAP”). The
      accounting policies followed in preparing these financial statements are those
      used by the Company as set out in the audited financial statements for the
      year
      ended December 31, 2006, except as disclosed in *(b),
      (c),* and *(d)* below.
      Certain information and note disclosures normally included in consolidated
      financial statements prepared in accordance with Canadian GAAP have been
      omitted. These interim financial statements should be read together with the
      Company’s audited financial statements for the year ended December 31,
      2006.




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




Certain
      of the comparative figures have been reclassified to conform to the presentation
      for the three and nine months ended September 30, 2007. In particular, for
      the
      three and nine months ended September 30, 2006, $0.1 million and $0.3 million
      of
      stock-based compensation, respectively, charged to operations have been
      reclassified to general and administrative expenses rather than disclosed
      separately.




9


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)




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




***(b)***  Effective
      January 1, 2007, the Company includes ore stockpiles
      within Inventories. Ore stockpiles represent ore that has been mined and is
      available for further processing. Work-in-process inventories, including ore
      stockpiles, are valued at the lower of average production cost and net
      realizable value, after a reasonable allowance for further processing and sales
      costs.




***(c)***  On
      March
      2, 2006, the Emerging Issues Committee issued EIC-160, *Stripping
      Costs Incurred in the Production Phase of a Mining Operation,* which
      requires stripping costs that represent a betterment to the mineral property
      to
      be capitalized and amortized in a rational and systematic manner over the
      reserves that directly benefit from the specific stripping activity. The Company
      adopted EIC-160 as of January 1, 2007 on a prospective basis. During the three
      and nine months ended September 30, 2007, the Company capitalized $1.9 million
      and $5.7 million, respectively, in deferred stripping costs and recorded
      amortization thereon in the amount of $0.6 million and $1.3 million,
      respectively. Deferred stripping costs are amortized using the
      units-of-production method over the expected life of the operation based on
      the
      estimated recoverable gold equivalent ounces.




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




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




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




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




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




10


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)




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




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




Elkhorn
      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 would become entitled to 60% and Elkhorn 40% of the positive
      free cash flow from the Mine, until both parties have received an equal amount
      (at which time Apollo and Elkhorn will have each received $17.7 million).
      Thereafter, the sharing would be 50/50. Additionally, Elkhorn is entitled to
      a
      10% interest distribution (reduced from 12% effective April 1, 2007) charged
      to
      the joint venture as interest expense (Note 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 September 30, 2007, Elkhorn had received cash flow of $2.8
      million.




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 $0.3 million and $0.8 million for the three and nine months ended September
      30, 2007, respectively.




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




**September 30,**
              **2007**
            
            **December 31,**
              **2006**Cash
                and cash equivalents
            
            $
            759
            
            $
            (64
            )Other
                non-cash current assets
            
            
            3,336
            
            
            2,5704,095
            
            
            2,506Property,
                plant and equipment
            
            
            7,555
            
            
            7,151Deferred
                stripping costs
            
            
            4,427
            
            
            -Restricted
                certificates of deposit
            
            
            4,827
            
            
            3,430Total
                assets
            
            $
            20,904
            
            $
            13,087Current
                liabilities
            
            $
            3,954
            
            $
            1,819Notes
                payable
            
            
            168
            
            
            527Accrued
                site closure costs
            
            
            6,472
            
            
            6,127Total
                liabilities
            
            $
            10,594
            
            $
            8,473




11


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)




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




Apollo’s
      50% share of the Montana Tunnels joint venture for the three and nine month
      periods ended September 30, 2007 are as follows:





**Three
                months**
              **ended**
              **September 30,**
              **2007**
            
            **Nine
                months**
              **ended**
              **September 30,**
              **2007**Revenue
                from sale of minerals
            
            $
            11,863
            
            $
            27,594Direct
                operating costs
            
            
            7,283
            
            
            18,278Depreciation
                and amortization
            
            
            351
            
            
            929Accretion
                expense – accrued site closure costs
            
            
            114
            
            
            3457,748
            
            
            19,552Operating
                income
            
            
            4,115
            
            
            8,042Interest
                income
            
            
            60
            
            
            157Interest
                expense
            
            
            (199
            )
            
            (786
            )Income
                from continuing operations
            
            $
            3,976
            
            $
            7,413Net
                cash used in investing activities
            
            $
            (3,183
            )
            $
            (8,090
            )Net
                cash (used in) provided by financing activities
            
            $
            (324
            )
            $
            1,459





**5.**
            **INVENTORIES**




Inventories
      consist of:




**September 30,**
              **2007**
            
            **December 31,**
              **2006**Concentrate
                inventory
            
            $
            123
            
            $
            –Stockpiled
                ore inventory (Note 3(b))
            
            
            320
            
            
            –Materials
                and supplies
            
            
            1,033
            
            
            660$
            1,476
            
            $
            660





**6.**
            **CONVERTIBLE
                DEBENTURES**




On
      February 23, 2007, the Company completed a private placement of $8.6 million
      aggregate principal amount of Series 2007-A convertible debentures (“2007
      Debentures”). Each $1,000 of principal amount of 2007 Debentures included 2,000
      common share purchase warrants (“2007 Debenture Warrants”) (Note 7(b)(i)). The
      2007 Debentures mature on February 23, 2009 and bear interest at a rate of
      12%
      per annum during the first year and 18% per annum during the second year,
      payable annually beginning on February 23, 2008.


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




12


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)




**6.**
            **CONVERTIBLE
                DEBENTURES (continued)**




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




Over
      the
      two-year term, the 2007 Debentures are accreted to their face value through
      a
      periodic charge to accretion expense with a corresponding credit to the
      liability component. The accretion expense is based on the effective interest
      method. For the three and nine months ended September 30, 2007, the Company
      recorded accretion expense of $0.7 and $1.4 million, respectively, related
      to
      the 2007 Debentures, which is included in interest expense.




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




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




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




Under
      the
      terms of the Registration Rights Agreements entered into by the Company in
      connection with the 2007 Debentures, the common shares underlying the 2007
      Debentures and the 2007 Debenture Warrants are required to be registered for
      resale with the U.S. Securities and Exchange Commission (“SEC”). If the
      registration statement with respect to 50% of such shares was not declared
      effective by the SEC by May 25, 2007, the Company would be required to pay
      additional interest to the holders of the 2007 Debentures equal to 6% per annum.
      The Company did not meet the May 25, 2007 effectiveness deadline and as a result
      accrued additional interest of $55,000 for the period commencing May 25, 2007
      through August 10, 2007, the date the effectiveness was approved by the SEC.
      Additionally, if the registration statement with respect to the remaining 50%
      of
      such shares was not declared effective by the SEC by August 22, 2007, the
      Company would be required to pay additional interest to the holders of the
      2007
      Debentures equal to 6% per annum until February 23, 2008 or until this condition
      is met. The Company did not meet the August 22, 2007 effectiveness deadline
      and
      as a result accrued additional interest of $28,000 for the period commencing
      August 22, 2007 through September 30, 2007.




13




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)




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




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




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




*(ii)*  On
      September 4, 2007, the Company issued 1,057,692 common shares of the Company
      at
      $0.50 per share in connection with acquiring rights to certain mineral claims
      at
      the Black Fox property.




***(b)***
            Warrants




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




**Date Issued**
            
            **Number of Warrants**
            
            **Number of Shares**
            
            **Exercise Price**
            
            **Expiry Date**Exercisable in US$November
                4, 2004
            
            
            4,215,100
            
            
            4,215,100
            
            
            0.40
            
            
            November
                4, 2007
            (1)November
                4, 2004
            
            
            240,000
            
            
            240,000
            
            
            0.80
            
            
            November
                4, 2007
            (2)November
                4, 2004
            
            
            1,396,000
            
            
            1,396,000
            
            
            0.80
            
            
            November
                4, 2007
            (2)November
                8, 2006
            
            
            8,344,103
            
            
            8,344,103
            
            
            0.50
            
            
            November
                8, 2009November
                8, 2006
            
            
            1,168,174
            
            
            1,168,174
            
            
            0.50
            
            
            November
                8, 2009February
                23, 2007
            
            
            17,160,000
            
            
            17,160,000
            
            
            0.50
            
            
            February
                23, 2009February
                23, 2007
            
            
            1,201,200
            
            
            1,201,200
            
            
            0.50
            
            
            February
                23, 200933,724,577
            
            
            33,724,577Exercisable in Cdn$January
                26, 2006
            
            
            2,000,000
            
            
            2,000,000
            
            
            0.39
            
            
            January
                26, 2008October
                30, 2006
            
            
            1,111,111
            
            
            1,111,111
            
            
            1.00
                (3
            )
            
            October
                30, 2008
            (3)3,111,111
            
            
            3,111,11136,835,688
            
            
            36,835,688





(1)
            3,735,100
                of these warrants were exercised prior to expiration for proceeds
                of $1.5
                million and the remaining 480,000 of these warrants expired unexercised
                on
                November 4, 2007.


(2)
            These
                warrants expired unexercised on November 4,
                2007.


(3)
            The
                exercise price of these warrants increased to Cdn$1.15 on October
                31,
                2007.





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




***(c)***
            Options




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


14


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)





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





**Fixed
                Stock Options**
            
            **Performance-based**
              **Stock
                Options****Number
                of**
              **Options**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Number
                of**
              **Options**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**Balances,
                December 31, 2006
            
            
            3,052,900
            
            $
            1.06
            
            
            1,230,852
            
            $
            0.80Options
                granted
            
            
            3,291,939
            
            
            0.57
            
            
            –
            
            
            –Options
                cancelled
            
            
            (31,750
            )
            
            1.07
            
            
            –
            
            
            –Options
                expired
            
            
            –
            
            
            –
            
            
            (1,230,852
            )
            
            0.80Balances,
                September 30, 2007
            
            
            6,313,089
            
            $
            0.80
            
            
            –
            
            $
            –





*(i)*  Fixed
      stock option plan




The
      Company has a stock option plan that provides for the granting of options to
      directors, officers, employees and service providers of the Company. Typically,
      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 September
      30, 2007, an aggregate of 5,826,597 fixed stock options were available for
      future grants of awards under the plan.




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




**Options
                Outstanding**
            
            **Options
                Exercisable****Number**
              **Outstanding**
            
            **Expiry
                Date**
            
            **Weighted
                Average**
              **Exercise**
              **Price per Share**
            
            **Weighted
                Average**
              **Remaining
                Contractual Life**
              **(in
                years****)**
            
            **Number**
              **Exercisable**
            
            **Weighted
                Average**
              **Exercise**
              **Price per Share**678,200
            
            
            February
                18, 2013
            
            $
            2.24
            
            
            5.4
            
            
            678,200
            
            $
            2.24261,000
            
            
            March
                10, 2014
            
            
            2.05
            
            
            6.4
            
            
            261,000
            
            
            2.0525,000
            
            
            May
                19, 2014
            
            
            1.44
            
            
            6.6
            
            
            25,000
            
            
            1.4421,200
            
            
            August
                10, 2014
            
            
            0.95
            
            
            6.9
            
            
            21,200
            
            
            0.951,162,750
            
            
            March
                10, 2015
            
            
            0.65
            
            
            7.4
            
            
            1,162,750
            
            
            0.65100,000
            
            
            August
                4, 2015
            
            
            0.27
            
            
            7.8
            
            
            100,000
            
            
            0.27300,000
            
            
            December
                12, 2015
            
            
            0.20
            
            
            8.2
            
            
            150,000
            
            
            0.20125,000
            
            
            March
                28, 2016
            
            
            0.65
            
            
            8.5
            
            
            125,000
            
            
            0.65200,000
            
            
            May
                23, 2016
            
            
            0.53
            
            
            8.7
            
            
            100,000
            
            
            0.53108,000
            
            
            August
                10, 2016
            
            
            0.48
            
            
            8.9
            
            
            54,000
            
            
            0.4840,000
            
            
            November
                9, 2016
            
            
            0.32
            
            
            9.1
            
            
            –
            
            
            –3,142,114
            
            
            February
                6, 2017
            
            
            0.57
            
            
            9.4
            
            
            –
            
            
            –100,000
            
            
            September
                1, 2011
            
            
            0.46
            
            
            3.9
            
            
            –
            
            
            –49,825
            
            
            August
                13, 2017
            
            
            0.46
            
            
            9.9
            
            
            –
            
            
            –6,313,089
            
            
            
            
            $
            0.80
            
            
            8.2
            
            
            2,677,150
            
            $
            1.15




15


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)





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





*(ii)*  Performance-based
      stock option plan




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




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




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





**Nine
                months endedSeptember 30,****2007**
            
            **2006**Risk
                free interest rate
            
            
            4.1
            %
            
            4.2
            %Dividend
                yield
            
            
            0
            %
            
            0
            %Volatility
            
            
            71
            %
            
            89
            %Expected
                life in years
            
            
            6
            
            
            6Weighted
                average grant-date fair value of stock options
            
            $
            0.37
            
            $
            0.41





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




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





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





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




Interest
      expense consists of:




**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Accretion
                on convertible debentures
            
            $
            1,063
            
            $
            271
            
            $
            2,534
            
            $
            775Interest
                paid on convertible debentures
            
            
            265
            
            
            265
            
            
            794
            
            
            794Amortization
                of deferred financing costs
            
            
            –
            
            
            80
            
            
            –
            
            
            237Interest
                related to Montana Tunnels joint venture agreement (Note
                4)
            
            
            144
            
            
            –
            
            
            593
            
            
            –Capital
                leases and other
            
            
            112
            
            
            110
            
            
            276
            
            
            133$
            1,584
            
            $
            726
            
            $
            4,197
            
            $
            1,939




16


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)





**9.**
            **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 September 30, 2007.




($
                thousands, except per share amounts)
            
            **Net
                income**
            
            **Shares**
            
            **Per
                Share****Basic
                earnings per share**Net
                income from continuing operations
            
            $
            2,117
            
            
            143,922,308
            
            $
            0.01Effect
                of dilutive securities: warrants
            
            
            –
            
            
            1,048,244
            
            
            –Effect
                of dilutive securities: stock options
            
            
            –
            
            
            231,453
            
            
            –**Diluted
                earnings per share**Net
                income from continuing operations
            
            $
            2,117
            
            
            145,202,005
            
            $
            0.01





**10.**
            **INCOME
                TAXES**




The
      Company recorded a $0.3 million recovery for income taxes for the period ended
      September 30, 2007 in connection with the flow-through units issued in October
      2006. In addition, income tax expense for the period has been offset by a
      recovery of prior tax losses.





**11.**
            **LITIGATION
                AND CLAIMS**




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




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




***(a)***
            Net
                changes in non-cash operating working capital items for the three
                and nine
                months ended September 30 are:




**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Increase
                (decrease) in:Accounts
                receivable and other
            
            $
            23
            
            $
            (78
            )
            $
            (1,576
            )
            $
            2,382Prepaids
            
            
            39
            
            
            (336
            )
            
            240
            
            
            (17
            )Inventories
            
            
            50
            
            
            231
            
            
            (815
            )
            
            375




17


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)





**12.**
            **SUPPLEMENTAL
                CASH FLOW INFORMATION
                (continued)**





**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Increase
                (decrease) in:Accounts
                payable
            
            
            791
            
            
            118
            
            
            1,197
            
            
            (4,280
            )Accrued
                liabilities
            
            
            (245
            )
            
            603
            
            
            1,120
            
            
            574Property
                and mining taxes payable
            
            
            139
            
            
            (68
            )
            
            267
            
            
            (277
            )$
            797
            
            $
            470
            
            $
            433
            
            $
            (1,243
            )





***(b)***
            Components
                of cash and cash equivalents as of September 30, 2007 and 2006
                are:




**September 30,2007**
            
            **September 30,**
              **2006**Cash
            
            $
            227
            
            $
            648Short-term
                investments
            
            
            6,410
            
            
            1,330Cash
                and cash equivalents
            
            $
            6,637
            
            $
            1,978





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




During
      the three and nine months ended September 30, 2007, (i) Series 2007-A
      convertible debentures with a face value of $200,000 were converted and the
      Company recorded a reduction of $94,000 in convertible debentures and a
      corresponding increase in equity; (ii) property, plant and equipment totaling
      $527,000 was acquired via issuance of shares (Note 7(a)(ii)); and (iii) the
      Company financed a portion of its insurance program included in Prepaids by
      issuing a note payable of $653,000.




During
      the nine months ended September 30, 2007, property, plant and equipment totaling
      $325,000 was acquired via issuance of notes payable. Also, during the nine
      months ended September 30, 2007, 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 (Note 6).




**13.**
            **SEGMENTED
                  INFORMATION**




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




Amounts
      as at September 30, 2007 are as follows:


18


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)





**13.**
              **SEGMENTED
                  INFORMATION
                  (continued)**





**MontanaTunnels**
            
            **Black**
              **Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Cash
                and cash equivalents
            
            $
            759
            
            $
            14
            
            $
            5,864
            
            $
            6,637Other
                non-cash current assets
            
            
            3,366
            
            
            134
            
            
            993
            
            
            4,4934,125
            
            
            148
            
            
            6,857
            
            
            11,130Property,
                plant and equipment
            
            
            7,563
            
            
            33,793
            
            
            3,128
            
            
            44,484Deferred
                stripping costs
            
            
            4,427
            
            
            –
            
            
            –
            
            
            4,427Restricted
                certificates of deposit
            
            
            5,449
            
            
            648
            
            
            –
            
            
            6,097Total
                assets
            
            $
            21,564
            
            $
            34,589
            
            $
            9,985
            
            $
            66,138Current
                liabilities and convertible debenture
            
            $
            3,960
            
            $
            244
            
            $
            11,934
            
            $
            16,138Accrued
                long-term
                liabilities
            
            
            –
            
            
            –
            
            
            133
            
            
            133Notes
                payable
            
            
            168
            
            
            27
            
            
            –
            
            
            195Convertible
                debenture
            
            
            –
            
            
            –
            
            
            4,676
            
            
            4,676Accrued
                site closure costs
            
            
            7,140
            
            
            396
            
            
            –
            
            
            7,536Deferred
                gain
            
            
            2,976
            
            
            –
            
            
            –
            
            
            2,976Total
                liabilities
            
            $
            14,244
            
            $
            667
            
            $
            16,743
            
            $
            31,654





Amounts
      as at December 31, 2006 are as follows:





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




19


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)





**13.**
            **SEGMENTED
                INFORMATION (continued)**





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


**Three
                months ended September 30, 2007****MontanaTunnels**
            
            **Black
                Fox**
            
            **Corporate**
              **and
                Other**
            
            **Total**Revenue
                from sale of minerals
            
            $
            11,863
            
            $
            –
            
            $
            –
            
            $
            11,863Direct
                operating costs
            
            
            7,285
            
            
            –
            
            
            –
            
            
            7,285Depreciation
                and amortization
            
            
            351
            
            
            –
            
            
            26
            
            
            377General
                and administrative expenses
            
            
            –
            
            
            –
            
            
            902
            
            
            902Accretion
                expense – accrued site closure costs
            
            
            126
            
            
            –
            
            
            –
            
            
            126Amortization
                of deferred gain
            
            
            (345
            )
            
            –
            
            
            –
            
            
            (345
            )Exploration
                and business development and other
            
            
            –
            
            
            –
            
            
            291
            
            
            2917,417
            
            
            –
            
            
            1,219
            
            
            8,636Operating
                income (loss)
            
            
            4,446
            
            
            –
            
            
            (1,219
            )
            
            3,227Interest
                income
            
            
            60
            
            
            –
            
            
            86
            
            
            146Interest
                expense
            
            
            (199
            )
            
            –
            
            
            (1,385
            )
            
            (1,584
            )Foreign
                exchange gain and other
            
            
            –
            
            
            –
            
            
            33
            
            
            33Income
                (loss) from continuing operations before income taxes
            
            $
            4,307
            
            $
            –
            
            $
            (2,219
            )
            $
            1,822Investing
                activitiesProperty,
                plant and equipment expenditures and deferred stripping
                expenditures
            
            $
            2,678
            
            $
            1,859
            
            $
            –
            
            $
            4,537





**Nine
                  months ended September 30, 2007****Montana**
                **Tunnels**
              
              **Black
                  Fox**
              
              **Corporateand
                  Other**
              
              **Total**Revenue
                  from sale of minerals
              
              $
              27,594
              
              $
              –
              
              $
              –
              
              $
              27,594Direct
                  operating costs
              
              
              18,280
              
              
              –
              
              
              –
              
              
              18,280Depreciation
                  and amortization
              
              
              929
              
              
              –
              
              
              78
              
              
              1,007General
                  and administrative expenses
              
              
              –
              
              
              –
              
              
              2,901
              
              
              2,901Accretion
                  expense – accrued site closure costs
              
              
              380
              
              
              –
              
              
              –
              
              
              380Amortization
                  of deferred gain
              
              
              (774
              )
              
              –
              
              
              –
              
              
              (774
              )Exploration
                  and business development and other
              
              
              –
              
              
              –
              
              
              2,028
              
              
              2,02818,815
              
              
              –
              
              
              5,007
              
              
              23,822Operating
                  gain (loss)
              
              
              8,779
              
              
              –
              
              
              (5,007
              )
              
              3,772Interest
                  income
              
              
              157
              
              
              –
              
              
              328
              
              
              485Interest
                  expense
              
              
              (786
              )
              
              –
              
              
              (3,411
              )
              
              (4,197
              )Financing
                  costs
              
              
              –
              
              
              –
              
              
              (480
              )
              
              (480
              )Foreign
                  exchange gain and other
              
              
              –
              
              
              –
              
              
              31
              
              
              31Income
                  (loss) from continuing operations before income taxes
              
              $
              8,150
              
              $
              –
              
              $
              (8,539
              )
              $
              (389
              )Investing
                  activitiesProperty,
                  plant and equipment expenditures and deferred stripping
                  expenditures
              
              $
              7,019
              
              $
              3,317
              
              $
              1,951
              
              $
              12,287




20


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)





**13.**
            **SEGMENTED
                INFORMATION (continued)**




**Three
                  months ended September 30, 2006****MontanaTunnels**
              
              **Black
                  Fox**
              
              **Corporateand
                  Other**
              
              **Total**Revenue
                  from sale of minerals
              
              $
              372
              
              $
              –
              
              $
              –
              
              $
              372Direct
                  operating costs
              
              
              3,211
              
              
              –
              
              
              –
              
              
              3,211Depreciation
                  and amortization
              
              
              298
              
              
              –
              
              
              26
              
              
              324General
                  and administrative expenses
              
              
              –
              
              
              –
              
              
              1,123
              
              
              1,123Accretion
                  expense – accrued site closure costs
              
              
              237
              
              
              –
              
              
              –
              
              
              237Exploration
                  and business development and other
              
              
              –
              
              
              –
              
              
              191
              
              
              1913,746
              
              
              –
              
              
              1,340
              
              
              5,086Operating
                  loss
              
              
              (3,374
              )
              
              –
              
              
              (1,340
              )
              
              (4,714
              )Interest
                  income
              
              
              76
              
              
              –
              
              
              23
              
              
              99Interest
                  expense
              
              
              (109
              )
              
              –
              
              
              (617
              )
              
              (726
              )Foreign
                  exchange loss and other
              
              
              –
              
              
              –
              
              
              (29
              )
              
              (29
              )Loss
                  from continuing operations before income taxes
              
              $
              (3,407
              )
              $
              –
              
              $
              (1,963
              )
              $
              (5,370
              )Investing
                  activitiesProperty,
                  plant and equipment expenditures
              
              $
              2,640
              
              $
              586
              
              $
              5
              
              $
              3,231




**Nine
                  months ended September 30, 2006****Montana**
                **Tunnels**
              
              **Black
                  Fox**
              
              **Corporate**
                **and
                  Other**
              
              **Total**Revenue
                  from sale of minerals
              
              $
              10,177
              
              $
              -
              
              $
              -
              
              $
              10,177Direct
                  operating costs
              
              
              13,957
              
              
              -
              
              
              -
              
              
              13,957Depreciation
                  and amortization
              
              
              1,199
              
              
              -
              
              
              83
              
              
              1,282General
                  and administrative expenses
              
              
              -
              
              
              -
              
              
              3,594
              
              
              3,594Accretion
                  expense – accrued site closure costs
              
              
              711
              
              
              -
              
              
              -
              
              
              711Exploration
                  and business development and other
              
              
              -
              
              
              -
              
              
              795
              
              
              79515,867
              
              
              -
              
              
              4,472
              
              
              20,339Operating
                  loss
              
              
              (5,690
              )
              
              -
              
              
              (4,472
              )
              
              (10,162
              )Interest
                  income
              
              
              190
              
              
              -
              
              
              63
              
              
              253Interest
                  expense
              
              
              (127
              )
              
              -
              
              
              (1,812
              )
              
              (1,939
              )Foreign
                  exchange loss and other
              
              
              -
              
              
              -
              
              
              (42
              )
              
              (42
              )Loss
                  from continuing operations before income taxes
              
              $
              (5,627
              )
              $
              -
              
              $
              (6,263
              )
              $
              (11,890
              )Investing
                  activitiesProperty,
                  plant and equipment expenditures
              
              $
              2,640
              
              $
              4,908
              
              $
              121
              
              $
              7,669


**14.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S.
                GAAP**




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




21


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)




**14.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**




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




**September 30,**
              **2007**
            
            **December 31,**
              **2006****Total
                assets in accordance with Canadian GAAP**
            
            **$**
            **66,138**
            
            **$**
            **51,804**Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(a)(ii)
            
            
            (1,879
            )
            
            (2,038
            )Deferred
                stripping costs (a)(iii)
            
            
            (4,427
            )
            
            –Black
                Fox development costs(b)
            
            
            (24,810
            )
            
            (22,354
            )Convertible
                debentures(c)
            
            
            657
            
            
            103Equity
                accounting for investment in Montana Tunnels joint
                venture(a)(i)
            
            
            (10,594
            )
            
            (8,473
            )**Total
                assets in accordance with U.S. GAAP**
            
            **$**
            **25,085**
            
            **$**
            **19,042**




**Total
                liabilities in accordance with Canadian GAAP**
            
            **$**
            **31,654**
            
            **$**
            **23,561**Convertible
                debentures (c)
            
            
            2,399
            
            
            764Equity
                accounting for investment in Montana Tunnels joint
                venture(a)(i)
            
            
            (10,594
            )
            
            (8,473
            )Deferred
                gain(a)(i)
            
            
            (2,976
            )
            
            (3,750
            )**Total
                liabilities in accordance with U.S. GAAP**
            
            **$**
            **20,483**
            
            **$**
            **12,102**





**September 30,**
              **2007**
            
            **December
                31,**
              **2006****Total
                shareholders’ equity in accordance with Canadian
                GAAP**
            
            **$**
            **34,484**
            
            **$**
            **28,243**Impairment
                of property, plant and equipment, and change in depreciation and
                amortization(a)(ii)
            
            
            (1,879
            )
            
            (2,038
            )Deferred
                stripping costs (a)(iii)
            
            
            (4,427
            )
            
            –Black
                Fox development costs(b)
            
            
            (24,810
            )
            
            (22,354
            )Convertible
                debentures(c)
            
            
            (1,742
            )
            
            (661
            )Deferred
                gain(a)(i)
            
            
            2,976
            
            
            3,750**Total
                shareholders’ equity in accordance with U.S. GAAP**
            
            **$**
            **4,602**
            
            **$**
            **6,940**




**Total
                shareholders’ equity and liabilities in accordance with U.S.
                GAAP**
            
            **$**
            **25,085**
            
            **$**
            **19,042**





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





**September 30,2007**
            
            **December 31,**
              **2006**Share
                capital
            
            $
            160,183
            
            $
            158,790Note
                warrants
            
            
            3,204
            
            
            1,062Contributed
                surplus
            
            
            38,908
            
            
            31,964Deficit
            
            
            (197,693
            )
            
            (184,876
            )**Total
                shareholders’ equity in accordance with U.S. GAAP**
            
            **$**
            **4,602**
            
            **$**
            **6,940**




22




**APOLLO
        GOLD CORPORATION**
 **Notes
        to the Condensed Consolidated Financial Statements**
 **Nine
        month period ended September 30, 2007**
 (Stated
        in U.S. dollars; tabular amounts in thousands)
 (Unaudited)


**14.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**





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




**Three
                months ended**
              **September
                30,**
            
            **Nine
                months ended**
              **September
                30,****2007**
            
            **2006**
            
            **2007**
            
            **2006**Income
                (loss) from continuing operations for the period
              based
                on Canadian GAAP
            
            $
            2,117
            
            $
            (5,370
            )
            $
            (94
            )
            $
            (11,890
            )Change
                in depreciation of property, plant and equipment (a)(ii)
            
            
            66
            
            
            –
            
            
            160
            
            
            183Capitalized
                deferred stripping costs and amortization (a)(iii)
            
            
            (1,340
            )
            
            –
            
            
            (4,427
            )
            
            –Black
                Fox development costs (b)
            
            
            (1,135
            )
            
            (587
            )
            
            (2,456
            )
            
            (2,682
            )Convertible
                debentures (c)
            
            
            231
            
            
            161
            
            
            (4,996
            )
            
            454Amortization
                of deferred gain (a)(i)
            
            
            (345
            )
            
            –
            
            
            (774
            )
            
            –Income
                taxes (e)
            
            
            (230
            )
            
            –
            
            
            (230
            )
            
            –Loss
                from continuing operations for the period based on U.S.
                GAAP
            
            
            (636
            )
            
            (5,796
            )
            
            (12,817
            )
            
            (13,935
            )Loss
                from discontinued operations for the period based on Canadian and
                U.S.
                GAAP
            
            
            –
            
            
            –
            
            
            –
            
            
            (250
            )Net
                loss and comprehensive loss for the period based on U.S.
                GAAP
            
            $
            (636
            )
            $
            (5,796
            )
            $
            (12,817
            )
            $
            (14,185
            )Basic
                and diluted income (loss) per share in accordance with U.S.
                GAAP:Continuing
                operations
            
            $
            0.00
            
            $
            (0.05
            )
            $
            (0.09
            )
            $
            (0.12
            )Discontinued
                operations
            
            
            –
            
            
            –
            
            
            –
            
            
            –Net
                income (loss) per share – U.S. GAAP basic and diluted
            
            $
            0.00
            
            $
            (0.05
            )
            $
            (0.09
            )
            $
            (0.12
            )





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




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




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




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




23


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)





**14.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**




*(iii)*  Deferred
      stripping costs




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




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




Under
      Canadian GAAP, mining development costs at the Black Fox Project have been
      capitalized. Under U.S. GAAP, these expenditures are expensed as incurred.
      Accordingly, for U.S. GAAP purposes, a reduction in property, plant and
      equipment of $24.8 million has been recorded as at September 30,
      2007.




***(c)***
            Convertible
                debentures




*(i)*  Under
      Canadian GAAP, the Series 2007-A Convertible Debentures (the “2007 Debentures”)
      were recorded as a compound financial instrument including detachable note
      warrants. On issuance in February 2007, under U.S. GAAP, the detachable note
      warrants are similarly treated as an equity instrument with the remainder of
      the
      2007 Debentures treated as a liability. Further, under U.S. GAAP, the beneficial
      conversion feature determined using the effective conversion price based on
      the
      proceeds allocated to the 2007 Debentures in accordance with EITF 00-27,
“Application of Issue No. 98-5 to Certain Convertible Instruments” (“EITF
      00-27”), is allocated to contributed surplus. This discount on the 2007
      Debentures, in the amount of $5.9 million, is recognized as additional interest
      expense immediately as the debt is convertible at the date of issuance. Canadian
      GAAP does not require the recognition of any beneficial conversion
      feature.




*(ii)*  Under
      Canadian GAAP, the 12% Series 2004-B Convertible Debentures (the “2004
      Debentures”) were recorded as a compound financial instrument including
      detachable note warrants. On issuance in November 2004, under U.S. GAAP, the
      detachable note warrant is similarly treated as an equity instrument with the
      remainder of the 2004 Debentures treated as a liability. Further, under U.S.
      GAAP, the beneficial conversion feature determined using the effective
      conversion price based on the proceeds allocated to the 2004 Debentures in
      accordance with EITF 00-27, is allocated to contributed surplus. This discount
      on the 2004 Debentures, in the amount of $0.1 million, is recognized as
      additional interest expense immediately as the debt is convertible at the date
      of issuance. Canadian GAAP does not require the recognition of any beneficial
      conversion feature.




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




24


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)





**14.**
            **DIFFERENCES
                BETWEEN CANADIAN AND U.S. GAAP
                (continued)**





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




*(i)*  Under
      Canadian GAAP, mining development costs at the Black Fox Project are included
      in
      cash flows from investing activities in the consolidated statements of cash
      flows.  Under U.S. GAAP, these expenditures are included in cash flows from
      operating activities.  Accordingly, under U.S. GAAP, the consolidated
      statements of cash flows for the three and nine months ended September 30,
      2007
      would reflect a decrease in cash used in investing activities of $1.1 million
      and $2.5 million, respectively, and a corresponding decrease in cash provided
      by
      operating activities for each period. Additionally, for the three and nine
      months ended September 30, 2006 the consolidated statements of cash flow under
      U.S. GAAP would reflect a decrease of $0.6 million and $2.7 million,
      respectively, used in investing activities, respectively, and a corresponding
      increase in cash used in operating activities for each period.




*(ii)*  Under
      Canadian GAAP, deferred stripping costs are included in cash flows from
      investing activities in the consolidated statements of cash flows.  Under
      U.S. GAAP, these stripping costs are included in cash flows from operating
      activities. Accordingly, under U.S. GAAP, the consolidated statements of cash
      flows for the three and nine months ended September 30, 2007 would reflect
      a
      decrease in cash used in investing activities of $1.9 million and $5.7 million,
      respectively, and a corresponding decrease in cash provided by operating
      activities.




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




***(e)***
            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.




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




25




**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)




**15.**
            **SUBSEQUENT
                EVENTS**




***(a)***
            Jipangu
                settlement agreement




On
      October 4, 2007, the Company entered into a settlement agreement (the
“Agreement”) with Jipangu, Inc., and Jipangu International, Inc. (collectively,
“Jipangu”) and certain of its subsidiaries. The Agreement was entered into to
      settle indemnification claims made by Jipangu under the Stock Purchase Agreement
      dated October 17, 2005, pursuant to which the Company sold to Jipangu the stock
      of certain subsidiaries owning, among other things, the Florida Canyon and
      Standard mines, in Nevada.




The
      indemnification claims related to certain costs associated with a leach pad
      issue, a liability for certain taxes and a liability for certain employee
      disability claims. Under the terms of the Agreement, the Company agreed (i)
      to
      pay Jipangu $650,000 in full satisfaction of the claims related to the leach
      pad
      and the tax claims and (ii) to reimburse Jipangu in full in respect of certain
      employee disability claims when and if damages related to those claims exceed
      $200,000.




The
      Company had accrued $600,000 for the estimated liability as of December 31,
      2006, and accrued an additional $183,000 as of September 30, 2007, $133,000
      of
      which is recorded as an accrued long-term liability for the employee disability
      claims that are described in the above paragraph.




***(b)***
            Credit
                facility and hedging terms




On
      October 12, 2007, the Company entered into a credit facility agreement for
      $8.0
      million. The credit facility, which was drawn on October 18, 2007 for the full
      amount of the facility, matures September 30, 2008 and bears interest at LIBOR
      plus 1.25%, repayable in four quarterly payments beginning December 31, 2007.
      The loan is secured by all of the assets of Montana Tunnels Mining, Inc. Upon
      repayment or conversion of the Series 2004-B convertible debentures (the “2004
      Debentures”) by December 2007, all of Apollo's assets at its Black Fox project
      will also be pledged as security for the loan. The quarterly payments are
      according to the following schedule: (i) 15% of the aggregate principal amount
      outstanding ("Principal Outstanding") on December 31, 2007; (ii) 33% of the
      Principal Outstanding on March 31, 2008; (iii) 50% of the Principal Outstanding
      on June 30, 2008 and; (iv) 100% of the Principal Outstanding on September 30,
      2008.




The
      credit facility agreement requires the Company to use proceeds from the loan
      as
      follows: (i) first, for repayment of the 2004 Debentures, and (ii) second,
      once
      the 2004 Debentures have been repaid in full or converted in full to common
      shares of the Company, for general working capital purposes.


26


**APOLLO
      GOLD CORPORATION**


**Notes
      to the Condensed Consolidated Financial Statements**


**Nine
      month period ended September 30, 2007**


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


(Unaudited)





**15.**
            **SUBSEQUENT
                EVENTS (continued)**




In
      order
      to meet certain loan criteria, Apollo on October 15, 2007 hedged 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 Montana Tunnels Mine during the
      12-month term of the facility. No gold or silver production was hedged. The
      lead
      and zinc hedge is 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.




The
      Company will not apply hedge accounting to this transaction. As a result, the
      Company will account for these contracts as investments and will record the
      changes in unrealized gains and losses in the statement of income each period.
      The fair value of these derivatives will be recorded as a current asset or
      current liability at each balance sheet date.




***(c)***
            Flow-through
                financing




On
      October 31, 2007, the Company completed an offering of 7,454,545 flow-through
      shares at Cdn$0.55 per share for net proceeds of Cdn$3.8 million. The
      underwriter received a 5.5% fee of Cdn$0.2 million and 372,727 compensation
      warrants. Each compensation warrant is immediately exercisable at Cdn$0.55
      per
      common share of the Company and expires on April 30, 2009.


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 condensed consolidated financial statements and related notes.
      The
      financial statements have been prepared in accordance with generally accepted
      accounting principles in Canada (Canadian GAAP). For a reconciliation to GAAP
      in
      the United States (U.S. GAAP), see Note 14 to the attached condensed
      consolidated financial statements.




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




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




**BACKGROUND
      AND RECENT DEVELOPMENTS**




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




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




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




On
      October 12, 2007, the Company entered into a credit facility agreement for
      $8.0
      million. The credit facility, which was drawn on October 18, 2007 for the full
      amount of the facility, matures September 30, 2008 and bears interest at LIBOR
      plus 1.25%, repayable in four quarterly payments beginning December 31, 2007.
      The loan is secured by all of the assets of Montana Tunnels Mining, Inc.
      Upon repayment or conversion of the Series 2004-B convertible debentures by
      December 2007, all of Apollo's assets at its Black Fox project will also be
      pledged as security for the loan. The quarterly payments are according to the
      following schedule: (i) 15% of the aggregate principal amount outstanding
      ("Principal Outstanding") on December 31, 2007; (ii) 33% of the Principal
      Outstanding on March 31, 2008; (iii) 50% of the Principal Outstanding on June
      30, 2008 and; (iv) 100% of the Principal Outstanding on September 30, 2008.
      The
      credit facility agreement requires the Company to use proceeds from the loan
      as
      follows: (i) first, for repayment of the 2004 Debentures, and (ii) second,
      once
      the 2004 Debentures have been repaid in full or converted in full to common
      shares of the Company, for general working capital purposes.




In
      order
      to meet certain loan criteria, Apollo on October 15, 2007 hedged 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. No gold or silver production was hedged. The lead and zinc hedge
      is 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.


28




On
      October 31, 2007, the Company completed an offering of 7,454,545 flow-through
      shares at Cdn$0.55 per share for net proceeds of Cdn$3.8 million. The
      underwriter received a 5.5% fee of Cdn$0.2 million and 372,727 compensation
      warrants. Each compensation warrant is immediately exercisable at Cdn$0.55
      per
      common share of the Company and expires on April 30, 2009.




**Montana
      Tunnels**





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





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





During
      the third quarter 2007, approximately 3,700,000 tons were mined, of which
      1,087,000 tons were ore. The mill processed 1,154,000 tons of ore at an average
      throughput of 12,500 tons per day for the quarter and payable production was
      9,500 ounces of gold, 158,000 ounces of silver, 3,371,000 lbs of lead and
      6,611,000 lbs of zinc. Apollo’s share of this production is 50%. The project to
      increase mill throughput by over 1,000 tons per day, by re-commissioning a
      larger primary crusher (last utilized in 2005), which was scheduled for
      completion at the end of August 2007, was only completed in the first half
      of
      October 2007.





Ore
                mined
            1,087,000
                tonsWaste
                mined
            2,616,000
                tonsTotal
                mined
            3,703,000
                tonsOre
                milled
            1,154,000
                tons




**Grade:**
              
              **Recoveries:**Au
                  ounces per ton
              0.0116
              Au
              77.6%Ag
                  ounces per ton
              0.2374
              Ag
              75.1%Pb
                  %
              0.2066
              Pb
              77.3%Zn
                  %
              0.4453
              Zn
              77.2%







Total
      cash costs for the third quarter 2007 on a by-product basis were minus $215
      per
      ounce of gold and on a co-product basis they were $459 per ounce of gold, $8.15
      per ounce of silver, $1.12 per lb of lead and $0.78 per lb of zinc.





During
      the third quarter 2007, the joint venture spent $1.5 million on capital
      projects, which included $1.0 million for the expansion of the tailings dam
      and
      $0.3 million for the upgrade of the primary crushing circuit. Apollo’s share of
      these capital expenditures is 50%.





**4th
      Quarter Forecast** –
      With the completion of the primary crusher project in October 2007, we
      anticipate that improvement in ore throughput will be achieved and there will
      be
      a respective increase in metal production. As a result, we believe that in
      the
      fourth quarter 2007, the Mine should achieve its best operational results of
      2007.





**Black
      Fox**





On
      August
      13, 2007, we filed a new NI 43-101 which demonstrates the continued expansion
      of
      Black Fox since the last published NI 43-101 dated August 14, 2006. The new
      mineral reserve and resource estimate was prepared by SRK Consulting (“SRK”),
      Denver, Colorado .


29





During
      the preparation of the NI 43-101, SRK and Apollo identified a potential infill
      drilling program of approximately 60 holes. If the drilling results of this
      program are positive, it could increase the amount of inferred resources that
      may be converted to indicated resources as part of the bankable feasibility
      study scheduled for completion in the first quarter of 2008. As at November
      7,
      2007, we had completed 39 surface holes and 7 underground holes. The table
      below
      summarizes the Black Fox Total Mineral Reserve as
      published in the NI 43-101:





**Black
      Fox – Probable Reserves**





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





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





In
      addition to the reserves above, the NI 43-101 contains the indicated and
      inferred resources shown in the tables below:





**Black
      Fox – Indicated Resources** **(1)**





**Mining
                Method**
            
            **Cutoff Grade**
              **Au g/t**
            
            **Tonnes**
              **(000)**
            
            **Grade**
              **Au g/t**Open
                Pit
            
            
            1.0
            
            
            997
            
            
            4.5Underground
            
            
            3.0
            
            
            667
            
            
            10.1





**Black
      Fox – Inferred Resources** **(2)**





**Mining
                Method**
            
            **Cutoff
                Grade**
              **Au
                g/t**
            
            **Tonnes**
              **(000)**
            
            **Grade**
              **Au
                g/t**Open
                Pit
            
            
            1.0
            
            
            3,256
            
            
            4.7Underground
            
            
            3.0
            
            
            929
            
            
            12.3





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


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





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





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


30


**Huizopa
      Project**




During
      the first quarter 2007, the Company made payments ahead of schedule in
      settlement of certain claims and




the
      outstanding land payments on its Huizopa properties. These payments resulted
      in
      Apollo’s 100%-owned Mexican subsidiaries owning 100% of the 128 square kilometer
      mining concessions known as Huizopa.




**METAL
      SALES & METAL PRICE AVERAGES**




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




**Three months ended September 30,**
            
            **Nine months ended September 30,****2007
                (1)**
            
            **2006
                (2)**
            
            **2007
                (1)(3)**
            
            **2006
                (2)****Metal
                sales:**Gold
                (ounces)
            
            
            4,755
            
            
            n/a
            
            
            11,399
            
            
            4,959Silver
                (ounces)
            
            
            79,048
            
            
            
            
            
            189,504
            
            
            116,004Lead
                (pounds)
            
            
            1,685,385
            
            
            
            
            
            4,081,191
            
            
            1,196,317Zinc
                (pounds)
            
            
            3,305,620
            
            
            
            
            
            7,718,926
            
            
            3,084,152Total
                revenue ($millions)
            
            $
            11.9
            
            
            
            
            $
            27.6
            
            $
            10.2**Total
                cash and production costs on a by-product basis:**Total
                cash costs per ounce of gold
            
            $
            (215
            )
            
            
            
            $
            (231
            )
            $
            1,422Total
                production costs per ounce of gold
            
            $
            (141
            )
            
            
            
            $
            (160
            )
            $
            1,664**Total
                cash costs on a co-product basis:**Total
                cash costs per ounce of gold
            
            $
            459
            
            
            
            
            $
            429
            
            $
            904Total
                cash costs per ounce of silver
            
            $
            8.15
            
            
            
            
            $
            8.15
            
            $
            17.07Total
                cash costs per pound of lead
            
            $
            1.12
            
            
            
            
            $
            0.86
            
            $
            0.77Total
                cash costs per pound of zinc
            
            $
            0.78
            
            
            
            
            $
            0.92
            
            $
            2.16**Average
                metal prices:**Gold
                - London bullion mkt. ($/ounce)
            
            $
            681
            
            $
            627
            
            $
            666
            
            $
            603Silver
                - London bullion mkt. ($/ounce)
            
            $
            12.70
            
            $
            11.67
            
            $
            13.12
            
            $
            11.21Lead
                - London Metal Exchange ($/pound)
            
            $
            1.43
            
            $
            0.59
            
            $
            1.07
            
            $
            0.53Zinc
                - London Metal Exchange ($/pound)
            
            $
            1.46
            
            $
            1.54
            
            $
            1.56
            
            $
            1.36





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




**Three months ended September 30,**
            
            **Nine months ended September 30,****($ in thousands, except per ounce of gold data)**
            
            **2007
                (1)**
            
            **2006
                (2)**
            
            **2007
                (1)(3)**
            
            **2006
                (2)**Gold
                ounces sold
            
            
            4,755
            
            
            -
            
            
            11,399
            
            
            4,959Direct
                operating costs
            
            $
            7,283
            
            
            n/a
            
            $
            17,031
            
            $
            13,957Less:Mining
                taxes, royalty expenses
            
            
            327
            
            
            
            
            
            763
            
            
            282By-product
                credits
            
            
            8,305
            
            
            
            
            
            19,668
            
            
            6,906Cash
                operating cost
            
            
            (1,349
            )
            
            
            
            
            (3,400
            )
            
            6,769Cash
                operating cost per ounce of gold
            
            **$**
            **(284**
            **)**
            
            
            
            **$**
            **(298**
            **)**
            **$**
            **1,365**Cash
                operating costs
            
            
            (1,349
            )
            
            
            
            
            (3,400
            )
            
            6,769Add:Mining
                taxes, royalty expenses
            
            
            327
            
            
            
            
            
            763
            
            
            282Total
                cash costs
            
            
            (1,022
            )
            
            
            
            
            (2,637
            )
            
            7,051Total
                cash cost per ounce of gold
            
            **$**
            **(215**
            **)**
            
            
            
            **$**
            **(231**
            **)**
            **$**
            **1,422**Total
                cash costs
            
            
            (1,022
            )
            
            
            
            
            (2,637
            )
            
            7,051Add:Depreciation
                & amortization
            
            
            351
            
            
            
            
            
            817
            
            
            1,199Total
                production costs
            
            
            (671
            )
            
            
            
            
            (1,820
            )
            
            8,250Total
                production cost per ounce of gold
            
            **$**
            **(141**
            **)**
            
            
            
            **$**
            **(160**
            **)**
            **$**
            **1,664**





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






31




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


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


**MATERIAL
      CHANGES IN RESULTS OF OPERATIONS**




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




**Revenue
      from the Sale of Minerals.**




Revenue
      for the three months ended September 30, 2007 increased to $11.9 million as
      compared to $0.4 million for the same period in 2006. The increase in revenue
      is
      due to the fact that the Montana Tunnels mill was shut down from May 12, 2006
      to
      March 1, 2007.




**Operating
      Expenses.**




*Direct
      Operating Costs.* Direct
      operating costs, which include mining costs, processing costs and smelting
      and
      refining charges, for the three months ended September 30, 2007 increased 127%
      to $7.3 million from $3.2 million for the three months ended September 30,
      2006.
      The increase in costs is a result of the resumption of production at Montana
      Tunnels on March 1, 2007 after being shut down since May 2006. Also, effective
      December 31, 2006, the Mine is a 50/50 joint venture, and therefore Apollo’s
      share of the direct operating costs is 50%.




*Depreciation
      and Amortization.* Depreciation and amortization expenses were $0.4 million and $0.3 million for
      the three months ended September 30, 2007 and 2006, respectively. Effective
      December 31, 2006, the Mine is a 50/50 joint venture, and therefore Apollo’s
      share of the Mine’s depreciation is 50%. This reduction in Apollo’s share of the
      Mine’s depreciation in 2007 is offset by the decrease in depreciation in 2006
      which resulted from the mill being shut down on May 12, 2006.




*General
      and Administrative Expenses.* General
      and administrative expenses were $0.9 million and $1.1 million for the three
      months ended September 30, 2007 and 2006, respectively. The decrease is a result
      of receiving a management fee in 2007 of $0.2 million for being the operator
      of
      the Montana Tunnels joint venture and lower corporate overhead
      costs.




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





*Amortization
      of Deferred Gain.* Amortization
      of the deferred gain, relating to the transfer of assets and liabilities to
      the
      Montana Tunnels joint venture, was $0.3 million for the three months ended
      September 30, 2007 and nil for the three months ended September 30, 2006.
      Amortization began upon resumption of production in March 2007.





*Exploration
      and Business Development Expense.* Expenses
      for exploration and development, consisting of exploration related expenses
      at
      our Huizopa Project, totaled $0.3 million and $0.2 million for the three months
      ended September 30, 2007 and 2006, respectively.




*Total
      Operating Expenses* .
      As a
      result of these expense components, our total operating expenses increased
      70%
      to $8.6 million for the three months ended September 30, 2007, from $5.1 million
      for the three months ended September 30, 2006.




**Other
      Income (Expenses).**




*Interest
      Income and Interest Expense.* ** We
      realized interest income of $0.1 million and incurred interest expense of $1.6
      million during the three months ended September 30, 2007 compared to $0.1
      million in interest income and $0.7 million in interest expense during the
      three
      months ended September 30, 2006. The increase in interest expense is due to
      an
      increase in accretion expense of $0.8 million, mostly related to the Series
      2007-A convertible debentures issued in February 2007, and interest of $0.1
      million related to the Montana Tunnels joint venture agreement.


32


**Income
      Taxes.**




We
      recorded a $0.3 million recovery for income taxes for the three months ended
      September 30, 2007 in connection with the flow-through units issued in October
      2006. Additionally, we recorded no income tax expense for the period since
      any
      taxable income will be offset by a recovery of prior tax losses.




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




As
      a
      result of the foregoing, we recorded income from continuing operations of $2.1
      million, or $0.01 per share,  for
      the
      three months ended September 30, 2007, as compared to a loss of $5.4 million,
      or
      $0.04 per share,  for
      the
      three months ended September 30, 2006.




**Net
      Income (Loss).**




For
      the
      three months ended September 30, 2007, we recorded net income of $2.1 million,
      or $0.01 per share, as compared to a net loss of $5.4 million, or $0.04 per
      share, for the three months ended September 30, 2006.




***Nine*** **Months Ended September 30, 2007 Compared to the Nine Months Ended September
      30,
      2006**




**Revenue
      from the Sale of Minerals.**




Revenue
      for the nine months ended September 30, 2007 increased 171% to $27.6 million
      from $10.2 million for the same period in 2006. The increase in revenue is
      due
      to milling higher grade ores, higher metal prices in 2007 and the fact that
      the
      mill was shut down from May 12, 2006 to March 1, 2007. These factors were
      partially offset because effective December 31, 2006, the Mine is a 50/50 joint
      venture, and therefore Apollo’s share of the revenue is 50%.




**Operating
      Expenses.**




*Direct
      Operating Costs.* Direct
      operating costs, which includes mining costs, processing costs and smelting
      and
      refining charges, for the nine months ended September 30, 2007 increased 31%
      to
      $18.3 million from $14.0 million for the nine months ended September 30, 2006.
      The increase in costs is a result of the resumption of production on March
      1,
      2007 after being shut down since May 2006. Also, effective December 31, 2006,
      the Mine is a 50/50 joint venture, and therefore Apollo’s share of the direct
      operating costs is 50%.




*Depreciation
      and Amortization.*  Depreciation
      and amortization expenses were $1.0 million and $1.3 million for the nine months
      ended September 30, 2007 and 2006, respectively. Effective December 31, 2006,
      the Mine is a 50/50 joint venture, and therefore Apollo’s share of the Mine’s
      depreciation is 50%.




*General
      and Administrative Expenses.* ** General
      and administrative expenses were $2.9 million and $3.6 million for the nine
      months ended September 30, 2007 and 2006, respectively. The decrease is a result
      of receiving a management fee in 2007 of $0.5 million for being the operator
      of
      the Montana Tunnels joint venture and lower corporate overhead
      costs.




*Accretion
      Expense – Accrued Site Closure Costs.* Accrued
      accretion expense was $0.4 million for the nine months ended September 30,
      2007
      compared to $0.7 million for the same period in 2006. Effective December 31,
      2006, the Mine is a 50/50 joint venture, and therefore Apollo’s share of the
      Mine’s accretion expense is 50%.





*Amortization
      of Deferred Gain.* ** Amortization
      of the deferred gain, relating to the transfer of assets and liabilities to
      the
      Montana Tunnels joint venture, was $0.8 million for the nine months ended
      September 30, 2007 and nil for the nine months ended September 30, 2006.
      Amortization began upon resumption of production in March 2007.





*Exploration
      and Business Development Expense.* ** Expenses
      for exploration and development, consisting of exploration related expenses
      at
      our exploration properties, totaled $2.0 million and $0.8 million for the nine
      months ended September 30, 2007 and 2006, respectively. The increase in
      exploration expenses is due to increased activity at the Huizopa property and
      the settlement of certain claims in relation to the Huizopa
      property.


33


*Total
      Operating Expenses* .
      As a
      result of these expense components, our total operating expenses increased
      to
      $23.8 million for the nine months ended September 30, 2007, from $20.3 million
      for the nine months ended September 30, 2006.




**Other
      Income (Expenses).**




*Interest
      Income and Interest Expense.* We
      realized interest income of $0.5 million and incurred interest expense of $4.2
      million during the nine months ended September 30, 2007 compared to $0.3 million
      in interest income and $1.9 million in interest expense during the nine months
      ended September 30, 2006. The increase in interest expense is due to an increase
      in accretion expense of $1.8 million, mostly related to the Series 2007-A
      convertible debentures issued in February 2007, and interest of $0.6 million
      related to the Montana Tunnels joint venture agreement.




*Financing
      Costs.* Financing
      costs of $0.5 million for the nine months ended September 30, 2007 were in
      connection with the Series 2007-A convertible debentures issued in February
      2007.




**Income
      Taxes.**




We
      recorded a $0.3 million recovery for income taxes for the nine months ended
      September 30, 2007 in connection with the flow-through units issued in October
      2006, but recorded no other recovery for income taxes as the net loss carry
      forwards are fully offset by a valuation allowance.




**Loss
      from Continuing Operations.**




As
      a
      result of the foregoing, we incurred a loss from continuing operations of $0.1
      million, or $0.00 per share,  for
      the
      nine months ended September 30, 2007, as compared to a loss of $11.9 million,
      or
      $0.10 per share, for the nine months ended September 30, 2006.




**Loss
      from Discontinued Operations.**




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




**Net
      Loss.**




For
      the
      nine months ended September 30, 2007, we incurred a net loss of $0.1 million,
      or
      $0.00 per share,  as
      compared to a net loss of $12.1 million, or $0.10 per share, for the nine months
      ended September 30, 2006.




**MATERIAL
      CHANGES IN LIQUIDITY**




To
      date,
      we have funded our operations primarily through issuances of debt and equity
      securities, joint venture contributions from our Montana Tunnels joint venture
      partner and, during the second and third quarters of 2007, from our share of
      the
      cash flow from the Montana Tunnels joint venture. At September 30, 2007, we
      had
      cash of $6.6 million, compared to cash of $4.5 million at December 31, 2006.
      The
      increase in cash since December 31, 2006 is the result of operating cash inflows
      of $5.8 million and financing cash inflows of $9.3 million, offset by investing
      cash outflows of $12.9 million.




During
      the nine months ended Spetember 30, 2007, cash provided by operating activities
      of $5.8 million resulted from improved performance at the Montana Tunnels mine,
      which includes the resumption of production on March 1, 2007 when milling was
      resumed, and higher metal prices.




During
      the nine months ended September 30, 2007, investing activities used $12.9
      million. Capitalized deferred stripping costs at the Montana Tunnels mine were
      $5.7 million. Capital expenditures for property, plant and equipment of $5.7
      million include $2.8 million for the further development of the Black Fox
      Project, $1.9 million for land payments at our Huizopa Project and $1.0 million
      for property, plant and equipment at the Montana Tunnels mine. Investing
      activities include $1.4 million for the funding of the trust account for the
      future reclamation of the Montana Tunnels mine.


34


During
      the nine months ended September 30, 2007, financing activities provided $9.3
      million in cash. On February 23, 2007, we completed a private placement of
      $8.6
      million unsecured convertible debentures (“2007 Debentures”) which had 17.2
      million share purchase warrants attached. The 2007 Debentures are convertible
      into common shares at $0.50 per common share until maturity on February 23,
      2009
      and bear interest at 12% in the first year and 18% in the second year. The
      share
      purchase warrants are exercisable for two years at an exercise price of $0.50
      per common share. Additionally, in March 2007, we borrowed $1.3 million from
      Teck Cominco (our 50% share) through an interest free, short-term note. Payments
      of notes payable accounted for a cash outflow of $2.0 million, of which $1.3
      million was repayment to Teck Cominco.




We
      estimate that with our September 30, 2007 cash balance of $6.6 million, our
      share of the projected cash flows from the joint ventured Montana Tunnels mine
      combined with the $8.0 million drawn on the credit facility entered into on
      October 12, 2007 and the Cdn$3.8 million raised from the flow-through equity
      issued October 31, 2007, we will have sufficient funds to finance the 2007
      and
      2008 work programs of $5.0 million at Black Fox and $2.0 million for exploration
      at Huizopa, as well as corporate overhead. However, we will continue to explore
      financing opportunities to further develop the Black Fox Project and expand
      our
      exploration program at the Huizopa Project, which may include Canadian
      flow-through financing for use at the Black Fox Project. The availability,
      amount, terms and timing of this financing are not certain at this
      time.




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




**MATERIAL
      CHANGES IN CONTRACTUAL OBLIGATIONS**




During
      the three months ended September 30, 2007, we financed a portion of our
      insurance program included in Prepaids by issuing a note payable of $0.7
      million, which is payable in monthly installments over nine months. The note
      bears an annual percentage rate of interest of 6.25%.




**MATERIAL
      CHANGES IN OFF BALANCE SHEET ARRANGEMENTS**




None.




**ENVIRONMENTAL**




The
      Company’s current environmental liabilities are at Montana Tunnels and Black
      Fox. As of September 30, 2007, we have accrued $7.5 million related to
      reclamation, an increase of $0.4 million from December 31, 2006. These
      liabilities are covered by a combination of surety bonds, restricted cash and
      property totaling $18.7 million at September 30, 2007. We have accrued the
      present value of management’s estimate of the liability as of September 30,
      2007.




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




The
      Company reports under Canadian GAAP and reconciles to U.S. GAAP. The application
      of U.S. GAAP has a significant effect on the net income or loss and net income
      or loss per share. For a detailed explanation see Note 14 of our interim
      financial statements.




**CRITICAL
      ACCOUNTING ESTIMATES AND POLICIES**




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


35


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




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




a)  Effective
      January 1, 2007, the Company includes ore stockpiles within
      Inventories. Ore stockpiles represent ore that has been mined and is available
      for further processing. Work-in-process inventories, including ore stockpiles,
      are valued at the lower of average production cost and net realizable value,
      after a reasonable allowance for further processing and sales
      costs.




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




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




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




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




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




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





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




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


**Interest
      Rate Risk**




When
      appropriate we invest excess cash in short-term debt instruments of the United
      States and Canadian governments and their agencies on both a fixed and variable
      interest rate basis. Our restricted certificates of deposit are invested in
      long-term debt instruments of the United States and Canadian governments and
      their agencies on a fixed interest rate basis. Over time the rates received
      on
      such investments may fluctuate with changes in economic conditions. As a result
      our investment income may fall short of expectations during periods of lower
      interest rates. We estimate that given the cash balances expected during 2007,
      a
      one percent change in interest rates would not materially impact our annual
      income. We may in the future actively manage our exposure to interest rate
      risk.




36




**Foreign
      Currency Exchange Rate Risk**




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




**Commodity
      Price Risk**




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




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




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




**Equity
      Price Risk**




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




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




**Disclosure
      Controls and Procedures**




Disclosure
      controls and procedures are our controls and other procedures that are designed
      to ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Securities Exchange Act of 1934, as amended, is
      recorded, processed, summarized and reported within the time periods specified
      in the Securities and Exchange Commission’s rules and forms. Disclosure controls
      and procedures include, without limitation, controls and procedures designed
      to
      ensure that information required to be disclosed by us in the reports that
      we
      file under the Securities Exchange Act is accumulated and communicated to our
      management, including our principal executive officer and principal financial
      officer, as appropriate to allow timely decisions regarding required financial
      disclosure.




37


As
      of the
      end of the period covered by this report, we carried out an evaluation, under
      the supervision and with the participation of our management, including the
      Chief Executive Officer and Chief Financial Officer, of the effectiveness of
      the
      design and operation of our disclosure controls and procedures pursuant to
      Exchange Act Rule 13a-15(b) under the Exchange Act. Based upon, and as of the
      date of, this evaluation, the Chief Executive Officer and Chief Financial
      Officer concluded that our disclosure controls and procedures were not
      effective, because of the material weaknesses discussed below. In light of
      the
      material weaknesses described below, we performed additional analysis and other
      post-closing procedures to ensure our consolidated financial statements were
      prepared in accordance with generally accepted accounting principles.
      Accordingly, management believes that the financial statements included in
      this
      report fairly present in all material respects our financial condition, results
      of operations and cash flows for the periods presented.




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




Also,
      related to the reduction in staffing at the Montana Tunnels mine in mid October
      2005 and an additional reduction in staffing in early May 2006, at which time
      the mine ceased production operations, our controls at that location were not
      operating as previously designed related to segregation of duties over
      procurement, inventory control and accounting duties. Corporate management
      has
      increased its involvement with day-to-day oversight and management of the
      Montana Tunnels mine and as of December 31, 2006 our management believed the
      change in controls was significant enough to be reported as a material
      weakness.





In
      an
      effort to address these material weaknesses, staffing additions and other
      changes in control were made during the first two quarters of 2007 which
      continue to be evaluated. We intend to continue to monitor our internal controls
      and we will continue to take steps to implement improvements or enhancements.





**Changes
      in Internal Control**




During
      the quarter ended September 30, 2007, we made no changes to our internal control
      over financial reporting that have materially affected, or are reasonably likely
      to materially affect, our internal control over financial
      reporting.




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




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




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




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




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




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




On
      September 4, 2007, the Company issued 1,057,692 common shares in connection
      with
      acquiring rights to certain mineral claims at the Company’s Black Fox Project.
      The Company relied on the exemption afforded by Section 4(2) of the Securities
      Act in issuing these shares.


38


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




None.




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




None.





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




None.




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




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




39


**SIGNATURES**




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




**APOLLO
                GOLD CORPORATION**Date:
                November 13, 2007
            /s/
                R. DAVID RUSSELLR.
                David Russell, President andChief
                Executive OfficerDate:
                November 13, 2007
            /s/
                MELVYN WILLIAMSMelvyn
                Williams,Chief
                Financial Officer and Senior Vice President Finance
              and
                Corporate Development




40


**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




41