Summary of APOLLO GOLD CORP

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 ''Management's Discussion and Analysis of Financial Condition and Results of Operations'' contained in our Annual Report on Form 10-K for the year ended December 31, 2008 as well as with the consolidated financial statements and related notes and the other information appearing elsewhere in this report. As used in this report, unless the context otherwise indicates, references to ''we,'' ''our,'' "us," the "Company" or ''Apollo'' refer to Apollo Gold Corporation and its subsidiaries collectively. The financial statements in this Form 10-Q have been prepared in accordance with generally accepted accounting principles in Canada (Canadian GAAP). For reconciliation to GAAP in the United States (U.S. GAAP), see Note 18 to the consolidated financial statements set forth above.

In this Form 10-Q, the terms "cash operating cost," "total cash cost" and "total production cost" are non-GAAP financial measures and are used on a per ounce of gold sold basis. Cash operating costs per ounce is equivalent to direct operating cost as found on the Consolidated Statements of Operations, less production royalty expenses and mining taxes but includes by-product credits for payable silver production. Total cash costs are 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 and accretion on accrued site closure costs. See "Reconciliation of Cash Operating and Total Production Costs per Ounce" below. References in this Form 10-Q to "$" are to United States dollars. Canadian dollars are indicated by the symbol "Cdn$".

Certain prior period figures have been reclassified to conform to the current period presentation. In particular, (1) the assets and liabilities of Montana Tunnels Mining, Inc, ("MTMI") as of December 31, 2008 and the results of MTMI's operations and cash flows for the three and nine months ended September 30, 2008 have been reclassified as discontinued operations and (2) for the three and nine months ended September 30, 2008, $1.6 million and $3.5 million, respectively, that were presented as cash inflows from investing activities have been reclassified to operating activities in connection with proceeds from the sale of derivative contracts.

BACKGROUND AND RECENT DEVELOPMENTS

We are principally engaged in gold mining including extraction, processing, and refining , as well as related activities including the exploration and development of potential mineral properties and acquisition of mining claims principally in North America. We own Black Fox, an open pit and underground mine and mill located in the Province of Ontario, Canada ("Black Fox"). The Black Fox mine site is situated seven miles east of Matheson and the mill complex is twelve miles west of Matheson. Mining of ores from the open pit began in March 2009 and milling operations commenced in April 2009. Underground mining at Black Fox is expected to commence in 2010.

During the third quarter of 2009, the Company adopted a plan to dispose of Montana Tunnels Mining, Inc., which includes the Montana Tunnels and Diamond Hill mines. The Montana Tunnels mine, a 50% joint venture ("Montana Tunnels"), is an open pit mine and mill that produced gold dore? and lead-gold and zinc-gold concentrates, located in the State of Montana. Montana Tunnels was placed under care and maintenance on April 30, 2009. The Diamond Hill mine, also located in the State of Montana, is currently under care and maintenance. On September 30, 2009, the Company signed a letter of intent to sell MTMI to the current 50% joint venture partner, Elkhorn Goldfields, Inc., for cash of $5.0 million payable in installments through May 2010 and a 4% net smelter royalty on future production at Montana Tunnels up to a maximum of $4.0 million. The consummation of the sale is subject to negotiation of definitive documents relating to the sale and payment of the $5.0 million cash purchase price. As of September 30, 2009, the Company recorded an impairment of $0.7 million on the net assets of MTMI.

We also own Mexican subsidiaries which own an 80 percent interest in the Huizopa Project joint venture, (20 percent Minas de Coronado, S. de R.L. de CV), an early stage exploration project located in the Sierra Madres in Chihuahua, Mexico.

Black Fox

During the third quarter of 2009, we mined 1,644,000 tonnes of material of which 217,000 tonnes was gold ore. The Black Fox mill processed 160,900 tonnes of ore (1,749 tonnes per day), at a grade of 4.05 grams per tonne, achieving a recovery rate of 94%, for total gold production of 19,718 ounces. We custom milled an additional 62,600 tonnes of lower grade ore, at a grade of 1.51 grams per tonne at a recovery rate of 92% for additional gold production of 2,760 gold ounces. Therefore, total gold produced was 22,478 ounces during the third quarter. Gold ounces sold during the third quarter of 2009 were 19,848 ounces. All gold sold was against the forward sales contracts at a realized price of $875 per ounce. The total cash cost per ounce of gold for the quarter was $575. Black Fox is scheduled to complete the overall mill site upgrade project in the fourth quarter of 2009 with the commissioning of the new conveyor and the recommissioning of the high pressure screen system this December. An expanded tailings dam water management system will also be completed in the fourth quarter of 2009. Gold production in the fourth quarter of 2009 is estimated to be approximately the same as the third quarter of 2009.

As at September 30, 2009, we were in compliance with the various operational covenants of the Project Facility. However, as a result of lower than planned gold production, during the third quarter of 2009 a "review event" as defined in the Project Facility was triggered. The occurrence of a review event allows the Banks to review the Project Facility and determine if they wish to continue with the Project Facility. On September 28, 2009, the Banks agreed to defer (i) the first scheduled repayment of $9,300,000 due on September 30, 2009 under the Project Facility and (ii) the requirement to fund the associated debt service reserve account also due on September 30, 2009, which, in accordance with the terms of the Project Facility, requires a reserve amount equal to, at all times after initial funding, the greater of $5,000,000 or the aggregate repayment amount due on the next repayment date. This deferral will enable the Banks and the Company to complete an ongoing technical review of the Black Fox project with the objective of rescheduling the quarterly repayment installments under the Project Facility. If we are not able to satisfactorily reschedule the quarterly repayment installments, then the payment of $9,300,000 and the reserve account funding obligation, each originally due on September 30, 2009, must be satisfied on the earlier to occur of (i) the completion of the Bank's technical review process of the Black Fox mine and (ii) December 31, 2009.

Capital expenditures for the three and nine months ended September 30, 2009 were approximately $14 million and $55 million, respectively. Expenditures during the third quarter 2009 included (1) $13 million towards the cost of upgrading the Black Fox mill to increase its capacity and throughput rate and (2) $1 million related to the purchase of the Pike River exploration property that lies between the Black Fox mine and the Grey Fox exploration property.

Huizopa Project

On July 7, 2009, we filed a Canadian National Instrument 43-101 for the Huizopa project. This 43-101 more fully describes the property and the drilling results from our 2008 drilling program, but does not contain any resources or reserves.

METAL SALES & METAL PRICE AVERAGES

BLACK FOX

The table below summarizes metal sales of gold and silver at the Black Fox mine,
as well as other key statistics, for the three months and from inception of
commercial production to the period ended September 30, 2009:

                                                               Three months         From inception to the
                                                                  ended                  period ended
                                                            September 30, 2009        September 30, 2009
Metal sales:
Gold (ounces)                                                            19,848                     24,891
Silver (ounces)                                                           1,040                      1,040
Total revenue ($millions)                                  $               19.1     $                 23.8
Production - Gold (ounces)                                               22,478                     31,194
Average realized price per ounce of gold                   $                875     $                  875
Total cash and production costs:
Total cash costs per ounce of gold                         $                575     $                  540
Total production costs per ounce of gold                   $                743     $                  727

RECONCILIATION OF CASH OPERATING AND TOTAL PRODUCTION COSTS PER OUNCE

BLACK FOX

                                                                                     From inception to the
                                                               Three months                  period
                                                            ended September 30,       ended September 30,
    ($ in thousands, except per ounce of gold data)                2009                       2009
Gold ounces sold                                                          19,848                     24,891
Direct operating costs                                     $              11,420     $               13,454
Less:  Mining taxes, royalty expenses                                          -                          -
   By-product credits                                                        (17 )                      (17 )
Cash operating cost                                                       11,403                     13,437
Cash operating cost per ounce of gold                      $                 575     $                  540
Cash operating costs                                                      11,403                     13,437
Add:  Mining taxes, royalty expenses                                           -                          -
Total cash costs                                                          11,403                     13,437
Total cash cost per ounce of gold                          $                 575     $                  540
Total cash costs                                                          11,403                     13,437
Add:  Depreciation & amortization                                          3,198                      4,436
Add:  Accretion on accrued site closure costs                                147                        216
Total production costs                                                    14,748                     18,089
Total production cost per ounce of gold                    $                 743     $                  727

MATERIAL CHANGES IN RESULTS OF OPERATIONS

Three Months Ended September 30, 2009 Compared to the Three Months Ended September 30, 2008

Revenue from the Sale of Minerals.

Revenue for the three months ended Sept 30, 2009 was $19.1 million from sales of 19,848 ounces of gold and 1,040 ounces of silver from Black Fox. Black Fox began production in May 2009 so there were no revenues in the prior year.

Operating Expenses.

Direct Operating Costs. Direct operating costs at Black Fox, which include mining costs and processing costs, for the three months ended September 30, 2009 were $11.4 million. The Black Fox mine commenced commercial production in May 2009 and therefore there were no direct operating costs in 2008.

Depreciation and Amortization. Depreciation and amortization expenses were $3.2 million and $0.03 million for the three months ended September 30, 2009 and 2008, respectively. Depreciation and amortization expenses at Black Fox, which only commenced commercial production in May 2009, were $3.2 million.

General and Administrative Expenses. General and administrative expenses were $1.1 million and $0.8 million for the three months ended September 30, 2009 and 2008, respectively. The increase is due primarily to a $0.2 million reduction in management fees collected from the Montana Tunnels joint venture as a result of the mine being placed on care and maintenance on April 30, 2009.

Accretion Expense - Accrued Site Closure Costs. Accrued accretion expense at Black Fox was $0.1 million for the three months ended September 30, 2009. The Black Fox mine commenced production in May 2009 and therefore these costs were capitalized in 2008.

Exploration and Business Development Expense. Expenses for exploration and development, consisting of drilling and related land expenses totaled $0.6 million and $0.8 million for the three months ended September 30, 2009 and 2008, respectively. The 2009 expenses are mostly from increased drilling activity at our Grey Fox property and the 2008 expenses related to exploration activity at our Huizopa project.

Total Operating Expenses. As a result of these expense components, our total operating expenses increased to $16.4 million for the three months ended September 30, 2009, from $1.6 million for the three months ended September 30, 2008.

Other Income (Expenses).

Interest Income and Interest Expense. We realized $0.1 million in interest income and interest expense of $3.1 million during the three months ended September 30, 2009 compared to $0.1 million in interest income and $1.1 million in interest expense during the three months ended September 30, 2008. The interest expense during the three months ended September 30, 2009 includes $1.2 million for the amortization of debt discount on the Project Facility.

Realized (Losses) Gains on Derivative Contracts. Realized losses on derivative contracts of $1.4 million for the three months ended September 30, 2009 are comprised of (1) a $1.7 million loss realized for settlement of gold futures contracts of which 19,848 gold ounces were delivered into the forward sales contracts and (2) realized gains of $0.3 million for the settlement of Canadian dollar foreign exchange contracts maturing during the quarter. For the three months ended September 30, 2008, we realized gains of $1.6 million for the settlement of lead and zinc contracts.

Unrealized Losses on Derivative Contracts. Unrealized losses on derivative contracts of $10.2 million for the three months ended September 30, 2009 are comprised of (1) an unrealized loss of $14.3 million for the change in value recorded for gold forward sales contracts held as of September 30, 2009 and (2) an unrealized gain of $4.1 million for the change in value of Canadian dollar foreign exchange contracts held as of September 30, 2009. Both the gold forward sales contracts and Canadian dollar foreign exchange contracts were entered into on February 20, 2009 in connection with the Project Facility.

(Loss) Income from Discontinued Operations.

For the three months ended September 30, 2009, we recorded a loss from discontinued operations of $2.3 million, as compared to income of $2.8 million, for the three months ended September 30, 2008. The Montana Tunnels mine was placed on care and maintenance on April 30, 2009 and was in full operation during the third quarter of 2008. As of September 30, 2009, we recorded an impairment of $1.6 million upon classifying Montana Tunnels as a discontinued operation.

Net (Loss) Income for the Period.

For the three months ended September 30, 2009, we recorded net loss of $14.0 million, or $0.05 per share, as compared to net income of $0.5 million, or $0.00 per share, for the three months ended September 30, 2008. The change between periods is the result of the items discussed above.

Nine Months Ended September 30, 2009 Compared to the Nine Months Ended September 30, 2008

Revenue from the Sale of Minerals.

Revenue for the nine months ended Sept 30, 2009 was $23.8 million from sales of 24,891 ounces of gold and 1,040 ounces of silver from Black Fox. Black Fox began production in May 2009 so there were no revenues in the prior year.

Operating Expenses.

Direct Operating Costs. Direct operating costs at Black Fox, which include mining costs and processing costs, for the nine months ended September 30, 2009 were $13.5 million. The Black Fox mine commenced commercial production in May 2009 and therefore there were no direct operating costs in 2008.

Depreciation and Amortization. Depreciation and amortization expenses were $4.5 million and $0.1 million for the nine months ended September 30, 2009 and 2008, respectively. Depreciation and amortization expenses at Black Fox, which only commenced commercial production in May 2009, were $4.4 million.

General and Administrative Expenses. General and administrative expenses were $3.1 million and $2.9 million for the nine months ended September 30, 2009 and 2008, respectively.

Accretion Expense - Accrued Site Closure Costs. Accrued accretion expense at Black Fox was $0.2 million for the nine months ended September 30, 2009. The Black Fox mine commenced production in May 2009 and therefore these costs were capitalized in 2008.

Exploration and Business Development Expense. Expenses for exploration and development, consisting of drilling and related land expenses totaled $1.1 million and $2.5 million for the nine months ended September 30, 2009 and 2008, respectively. The 2009 expenses are mostly from increased drilling activity at our Grey Fox property and the 2008 expenses primarily related to exploration activity at our Huizopa project.

Total Operating Expenses. As a result of these expense components, our total operating expenses increased to $22.3 million for the nine months ended September 30, 2009, from $5.5 million for the nine months ended September 30, 2008.

Other Income (Expenses).

Interest Income and Interest Expense. We realized interest income of $0.1 million and interest expense of $5.5 million during the nine months ended September 30, 2009 compared to $0.2 million in interest income and $3.1 million in interest expense during the nine months ended September 30, 2008. The interest expense during the nine months ended September 30, 2009 includes $1.6 million for the amortization of debt discount on the Project Facility. Additionally, interest of $1.8 million was capitalized for the development of the Black Fox project, which included $0.7 million of amortization of the debt discount on the Project Facility.

Debt Transaction Costs. During the nine months ended September 30, 2009, we recorded debt transaction costs of $1.8 million. The $1.8 million costs are comprised of (1) $0.6 million for legal and other administrative costs associated with the Project Facility and (2) $1.2 million related to the issuance of common shares and warrants issued to a financial advisory services firm for services (See Note 8(b) to the financial statements for further details).

Loss on Modification of Debentures. During the nine months ended September 30, 2009, we recorded a loss on modification of debentures of $2.0 million which took place in the first quarter. The $2.0 million loss is in connection with the issuance of shares and extension of and lowering the exercise price of existing warrants in connection with the one year extension of $4.3 million face value Series 2007-A convertible debentures.

Realized (Losses) Gains on Derivative Contracts. Realized losses on derivative contracts of $1.6 million for the nine months ended September 30, 2009 are comprised of (1) a $2.4 million loss realized for settlement of gold futures contracts covering 29,123 ounces of gold., (2) realized gains of $0.4 million for the settlement of Canadian dollar foreign exchange contracts and (3) realized gains of $0.4 million for the settlement of gold, silver and lead contracts that matured in the first quarter. For the nine months ended September 30, 2008, we realized gains of $3.5 million for the settlement of lead and zinc contracts.

Unrealized Losses on Derivative Contracts. Unrealized losses on derivative contracts of $25.2 million for the nine months ended September 30, 2009 are comprised of (1) an unrealized loss of $31.0 million for the fair value recorded for gold forward sales contracts held as of September 30, 2009, (2) an unrealized gain of $6.3 million for the fair value of Canadian dollar foreign exchange contracts held as of September 30, 2009 and (3) a $0.5 million loss for the change in value recorded for gold, silver and lead contracts held at the beginning of the year which matured during the first quarter. Both the gold forward sales contracts and Canadian dollar foreign exchange contracts were entered into on February 20, 2009 in connection with the Project Facility.

(Loss) Income from Discontinued Operations.

For the nine months ended September 30, 2009, we recorded a loss from discontinued operations of $3.8 million, as compared to income of $9.9 million for the nine months ended September 30, 2008. The Montana Tunnels mine was placed on care and maintenance on April 30, 2009 and was in full operation during most of 2008. As of September 30, 2009, we recorded an impairment of $1.6 million upon classifying Montana Tunnels as a discontinued operation.

Net (Loss) Income for the Period.

For the nine months ended September 30, 2009, we recorded a net loss of $37.5 million, or $0.16 per share, as compared to net income of $2.9 million, or $0.02 per share, for the nine months ended September 30, 2008. The change between periods is the result of the items discussed above.

MATERIAL CHANGES IN LIQUIDITY

To date, we have funded our operations primarily through issuances of debt and equity securities and cash generated by discontinued operations (Montana Tunnels). At September 30, 2009, we had cash of $4.5 million, compared to cash of $3.1 million at December 31, 2008. The increase in cash since December 31, 2008 is primarily the result of operating cash inflows of $5.8 million and financing cash inflows of $53.9 million, mostly offset by investing cash outflows of $57.8 million.

During the nine months ended September 30, 2009, net cash used in investing activities totaled $57.8 million. Capital expenditures for property, plant and equipment of $54.6 million were for the development of Black Fox. Cash outflows for restricted cash and certificates of deposit of $3.3 million were comprised of an inflow of $5.8 million being released from restricted cash upon meeting certain requirements of our lenders which were offset by a $9.0 million increase in our environmental bonding posted for Black Fox reclamation.

During the nine months ended September 30, 2009, cash provided by financing activities was $53.9 million. Cash inflows of financing activities included (1) the $70.0 million Project Facility ($70.0 million less the arrangement fee of $3.5 million), (2) $10.7 million of net proceeds from the private placement completed on July 15, 2009 and (3) the exercise of 4.8 million warrants at an exercise price of $0.176 per common share for proceeds of $0.9 million. These inflows were partially offset by cash outflows for repayment of debt of $23.0 million which included the repayment of a $15.0 million bridge facility.

We estimate that with our September 30, 2009 cash balance of $4.5 million, the projected cash flows from Black Fox and assuming the successful rescheduling of the quarterly installment payments of the Project Facility, we will have sufficient funds to (1) fund the remainder of the 2009 work programs for the continued development of Black Fox, (2) fund planned exploration activities, (3) repay the debt obligations due in 2009 and (4) fund corporate overhead.

MATERIAL CHANGES IN CONTRACTUAL OBLIGATIONS

Not applicable.

MATERIAL CHANGES IN OFF BALANCE SHEET ARRANGEMENTS

On September 30, 2009, we signed a letter of intent to sell MTMI to the current 50% joint venture partner, Elkhorn Goldfields, Inc., for cash of $5.0 million payable in installments through May 2010 and a 4% net smelter royalty on future production at Montana Tunnels up to a maximum of $4.0 million. The consummation of the sale is subject to negotiation of definitive documents relating to the sale and payment of the $5.0 million cash purchase price.

At September 30, 2009, we had no other existing off-balance sheet arrangements, as defined under SEC rules, that have or are reasonably likely to have a material current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

ACCRUED RECLAMATION COSTS

As of September 30, 2009, we have accrued $14.8 million related to reclamation obligations at our Black Fox and Montana Tunnels properties, an increase of $4.2 million from December 31, 2008. These liabilities are covered by a combination of surety bonds, restricted certificates of deposit and property totaling $21.6 million at September 30, 2009. We have accrued the present value of management's estimate of these liabilities as of September 30, 2009.

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

The Company reports under Canadian GAAP and reconciles to U.S. GAAP. The application of U.S. GAAP has a significant effect on the net loss and net loss per share. For a detailed explanation see Note 18 of our interim financial statements.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

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