APOLLO GOLD CORP - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

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

(State or Other Jurisdiction of

(I.R.S. Employer

Incorporation or Organization)

Identification No.)

4601 DTC Blvd, Suite 750

Denver, Colorado 80237

(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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b2 of the Exchange Act).

At November 1, 2004, there were 79,632,189 common shares of Apollo Gold Corporation outstanding.

TABLE OF CONTENTS

	Page
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet (Unaudited) -- As Of September 30, 2004		3
Consolidated Statement Of Operations and Deficit(Unaudited)
For The Three and Nine Month Periods Ended September 30, 2004 and 2003		4
Consolidated Statement of Cash Flows (Unaudited)
For The Three and Nine Months Ended September 30, 2004 and 2003		5
Notes To Financial Statements (Unaudited)		5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		26
Item 3. Quantitative and Qualitative Disclosures about Market Risk		36
Item 4. Controls and Procedures		37
Part II - Other Information		39
Item 1. Legal Proceedings		39
Item 2. Changes in Securities and Use of Proceeds		39
Item 3. Defaults upon Senior Securities		39
Item 4. Submission of Matters to A Vote of Security Holders		39
Item 5. Other Information		39
Item 6. Exhibits		39
Signatures		40
Exhibits		41

STATEMENTS REGARDING FORWARD LOOKING INFORMATION

This report, including the Notes to Unaudited Consolidated Financial Statements, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended. Forward-looking statements include, without limitation, with respect to our financial condition, results of operations, production, costs, start-up of the Standard Mine, completing stripping at Montana Tunnels, feasibility studies at Black Fox, 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 forward-looking terminology, such as “may”, “will”, “should”, “expect”, “anticipate”, “estimate”, “continue”, “plans”, “intends”, or other similar terminology. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is anticipated or forecasted in these forward-looking statements due to numerous factors, including, but not limited to, the outcome of assays and additional exploration sampling and drilling efforts, delay in permits or approvals, technical or permitting problems, unanticipated drilling problems or costs, variations in ore grade, the market price of gold and other minerals, unanticipated delays or costs for construction, or start-up at our mines, unanticipated reclamation liabilities, the availability and timing of external financing or acceptable terms and other factors disclosed under the heading “Risk Factors” in Apollo Gold’s 10-K for the year ended December 31, 2003 as well as our 10-Q filings for the periods ended March 31, 2004 and June 30, 2004 and elsewhere in Apollo Gold documents filed from time to time with the Toronto Stock Exchange, The American Stock Exchange, The United States Securities and Exchange Commission and other regulatory authorities. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. We undertake no obligation to update forward-looking statements.

ACCOUNTING PRINCIPLES, REPORTING CURRENCY AND OTHER INFORMATION

Apollo Gold Corporation prepares its consolidated financial statements in accordance with accounting principles generally accepted in Canada (“Cdn GAAP”) and publishes its financial statements in United States dollars. This Quarterly Report on Form 10-Q should be read in conjunction with our consolidated financial statements and related notes for the fiscal year ended December 31, 2003 included in our Annual Report (the “Annual Report”) filed with the SEC. 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

The 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.

The terms “cash operating cost” and “total cash cost” are used on a per ounce of gold basis. Cash operating cost per ounce is equivalent to direct operating costs expense for the period as found on the Consolidated Statements of Operations, less mining taxes and by-product credits payable for silver, lead, and zinc divided by the number of ounces of gold sold during the period. The term “total cash cost” per ounce is equivalent to mining operations expense for the period, less by-product credits payable, plus royalty expenses for silver, lead and zinc, divided by the number of ounces of gold sold during the period. The term “total production costs” is total cash costs plus depreciation and amortization.

This information differs from measures of performance determined in accordance with generally accepted accounting principles 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.

ITEM 1: FINANCIAL STATEMENTS

These consolidated financial statements should be read in conjunction with the financial statements, accompanying notes and other relevant information included in the Company’s report on Form 10-K for the year ended December 31, 2003.

Interim Consolidated Financial Statements of

APOLLO GOLD CORPORATION

September 30, 2004

APOLLO GOLD CORPORATION
Consolidated Balance Sheets
(In thousands of United States dollars)

	September 30, 2004			December 31, 2003
ASSETS	(Unaudited)			(Audited)

CURRENT
Cash and cash equivalents	$	1,414		$	25,851
Short-term investments		-			5,855
Accounts receivable		1,543			4,647
Prepaids		510			552
Broken ore on leach pad		12,403			9,594
Inventories (Note 4)		3,297			2,839
		19,167			49,338
BROKEN ORE ON LEACH PAD		2,363			1,827
PROPERTY, PLANT AND EQUIPMENT (Note 5)		52,659			38,519
DEFERRED STRIPPING COSTS		35,479			24,033
RESTRICTED CERTIFICATE OF DEPOSIT AND
OTHER ASSETS		8,997			6,893
	$	118,665		$	120,610
LIABILITIES

CURRENT
Accounts payable	$	9,959		$	5,848
Accrued liabilities		2,850			2,781
Notes payable		2,992			4,117
Property and mining taxes payable		1,081			1,080
		16,882			13,826
NOTES PAYABLE AND LONG-TERM LIABILITY		1,525			3,275
ACCRUED SITE CLOSURE COSTS		22,947			21,619
		41,354			38,720

CONTINUING OPERATIONS (Note 1)
COMMITMENTS AND CONTINGENCIES (Note 9)

SHAREHOLDERS' EQUITY

Share capital (Note 6)		134,958			120,624
Issuable common shares		231			231
Contributed surplus (Note 6)		8,147			7,172
Deficit		(66,025	)		(46,137	)
		77,311			81,890
	$	118,665		$	120,610

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


	3

APOLLO GOLD CORPORATION

Consolidated Statements of Operations and Deficit

(In thousands of United States dollars, except per share amounts)
(Unaudited)

	Three months ended					Nine months ended
	September 30,					September 30,
	2004			2003		2004			2003
REVENUE
Revenue from sale of minerals	$	12,720		$	20,098	$	45,904		$	46,025
OPERATING EXPENSES
Direct operating costs		14,489			16,293		47,887			36,965
Depreciation and amortization		1,292			1,449		3,894			4,226
General and administrative expenses		1,087			1,088		4,325			3,360
Stock-based compensation		388			20		487			361
Accretion expense		783			320		1,474			960
Royalty expense		133			237		507			687
Exploration and business development		515			52		774			2,052
		18,687			19,459		59,348			48,611
OPERATING (LOSS) INCOME		(5,967	)		639		(13,444	)		(2,586	)
OTHER INCOME (EXPENSES)
Interest income		10			10		261			58
Interest expense		(80	)		(127

Yukon Territory, Canada	Not Applicable
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)