Apollo Gold

March 16, 2005 23:09 ET

Apollo Gold Reports Fourth Quarter and 2004 Results




MARCH 16, 2005 - 23:09 ET

Apollo Gold Reports Fourth Quarter and 2004 Results

DENVER, COLORADO--(CCNMatthews - March 16, 2005) -

Apollo Gold Corporation ("Apollo" or the "Company") (TSX:APG)(AMEX:AGT)
reports the results for the three months and year ended December 31,
2004, (in U.S. dollars) as follows.

Apollo recorded a net loss of $4.4 million for the fourth quarter of
2004 and a loss of $18.2 million for the year 2004. These results
compare to a net earnings for the corresponding quarter 2003 of $0.3
million and a net loss for the year 2003 of $2.2 million. The loss per
share in 2004 was $0.23, compared to a loss per share of $0.04 for the
year 2003. The loss per share for the fourth quarter 2004 was $0.06,
compared to earnings per share of $0.01 in the corresponding quarter of
2003. Revenues for the year 2004 were $64.7 million compared to $66.8
million in 2003. Sales of gold were 106,825 ounces in 2004 compared to
145,935 ounces in 2003. Revenues for the fourth quarter 2004 were $19.1
million and gold sales were 29,533 ounces compared to revenues of $20.8
million and gold sales of 38,332 ounces in the fourth quarter 2003.

2004 Highlights

-- Production of 106,825 ounces of gold at total cash cost of $393 per

-- Completed capital stripping in fourth quarter 2004 at Montana

-- Development of the new Standard Mine with construction of the leach
pad and facilities completed in the fourth quarter -- first gold pour in
December 2004.

-- Completion of a 920-meter-long underground drill drift on the 235
level of the Black Fox Mine.

-- 84,000 meters (315 holes) of surface and underground core drilling
completed at Black Fox in 2004 with gold grades indicating the
mineralized zone is still open at depth and along strike. Continued
permitting and commenced the feasibility study for the project.

-- New base metal zone discovered at Black Fox -- independent of the
primary gold system.

-- Updated proven and probable reserves at 1.8 million ounces of gold.

-- New exploration joint venture called the Huizopa Project in the
Sierra Madre area of Mexico.

-- Year-end cash and cash equivalents of $6.9 million.

Consolidated Financial Results Summary
(All dollars in US 000's unless otherwise stated)

Three months ended Year
------------------- ------------------------
Dec 04 Dec 03 2004 2003
--------- --------- ------------ -----------

Net earnings /(loss) $(4,369) 270 $(18,189) (2,186)
Operating cash flow (2,880) 2,603 (7,684) 5,603

Net earnings/(Loss) per
share basic and diluted $(0.06) 0.01 $(0.23) (0.04)

Undiluted shares (average) 78,716,042 54,536,679
Diluted shares at year end 114,897,532 87,329,314

Gold ounces sold 29,533 38,332 106,825 145,935
Total cash costs per
ounce(1) $365 $330 $393 $289

Average realized gold
price per ounce $403 $380 $376 $360
Gold spot price per ounce
($/oz)(2) $433 $383 $409 $364

(1) Total cash cost is a non-GAAP measure, defined below.
(2) Average gold price as per London PM fix.

Sales and Production Costs

Sales of gold for the fourth quarter 2004 were 29,533 ounces compared to
38,332 ounces in the corresponding period 2003. Sales for the year 2004
of 106,825 ounces gold were 39,110 ounces lower than 2003 mainly as a
result of the reduced mining activity at Florida Canyon (29,000 ounces
lower) and the mining of fringe mineralization resulting in lower grade
materials being processed at Montana Tunnels during the second and third
quarters 2004.

Three months ended Year
----------------------- -----------------------
Dec 04 Dec 03 2004 2003
------------ ---------- ----------- -----------
Gold ounces 29,533 38,332 106,825 145,935
Silver ounces 212,768 152,686 1,031,156 471,241
Lead payable pounds 3,086,251 3,980,942 10,064,265 10,843,184
Zinc payable pounds 7,469,792 8,291,869 26,222,805 21,792,452

During the year 2004 Apollo achieved an average realized price per ounce
of gold of $376 compared to $360 per ounce in 2003.

Year ended December 31,
2004 2003
------------- ------------
Average sales price per ounce of gold $ 409 $ 364
Average loss on hedge position (33) (4)
------------- ------------
Average realized price per ounce gold sold 376 360

Costs per ounce of gold $/oz $/oz
------------- ------------
Cash operating costs $ 372 $ 275
Royalties and mining taxes 21 14
------------- ------------
Total cash costs 393 289
Depreciation, amortization and accretion 47 36
------------- ------------
Total production costs 440 325

The above cash operating, total cash and total production costs are
non-GAAP financial measures and are calculated in accordance with The
Gold Institute guidelines and used by management to assess performance
of individual operations as well as a comparison to other gold

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,
less production royalties, mining taxes and by-product credits for
payable silver, lead and zinc. We have included cash operating costs
information to provide investors with information about the cost
structure of our mining operations.

The term "total cash costs" is cash operating costs plus production
royalties and mining taxes.

The term "total production costs" includes total cash costs plus
depreciation and amortization.


Florida Canyon

The Florida Canyon open pit, heap leach gold mine located in
northwestern Nevada produced 17,443 ounces of gold in the fourth quarter
2004 and 73,082 ounces of gold for the year, at a total cash cost of
$387 per ounce of gold and $362 per ounce of gold, respectively. Florida
Canyon also produced 60,405 ounces of payable by-product silver during
the year, the proceeds of which are credited against cash operating
costs. During 2004, high wall instability at Florida Canyon in the
Switchback pit required that the mining plan be changed to the Central
pit resulting in lower grade ores than anticipated.

In the third quarter 2004 the crushing of ore was suspended and only run
of mine ore was placed on the leach pad. On March 1, 2005, the Company
ceased mining operations. The leach pad will continue to be actively
leached and produces gold ounces. The Company expects to make a decision
later in 2005 whether to build the permitted leach pad expansion and
therefore recommence mining. Currently, mining activity is concentrated
on the advancement of the new Standard Mine.

2004 2003 2002
---------- ---------- --------
Gold produced (oz) 73,082 101,811 121,516
Total cash costs ($/oz) $362 $285 $243
Total production cost ($/oz) $397 $325 $288

Gold reserves (ounces at year end) 263,600 374,000 330,900

Standard Mine

In May 2004 Apollo received the necessary permits allowing it to develop
the Standard Mine and construct the leach pad and associated facilities.
During the fourth quarter of 2004, the processing systems and initial
mine development were completed and heap leaching of ore commenced with
the first pour of development gold ounces occurring in late December
2004. In the first quarter 2005, ore deliveries to the pad will continue
and commercial production is anticipated to occur in the second quarter
2005. Total capital spending at the Standard Mine in 2004 was $9.0
million ($10.6 million with reclamation bonding costs). The mine is
situated 8 kilometers south of the Florida Canyon mine and is operated
in conjunction with the Florida Canyon operation, sharing overheads and
the plant for carbon stripping and gold production.

Montana Tunnels

Montana Tunnels is an open pit poly-metallic mine located near Helena,

Montana Tunnels produced 12,090 ounces of gold in the fourth quarter
2004 for a total of 33,743 ounces of gold for the year 2004. The mine
also had payable production of 970,751 ounces of silver, 10,064,265
pounds of lead and 26,222,805 pounds of zinc, during 2004, the sales of
which are credited against cash operating costs. Total cash costs per
ounce of gold were $333 per ounce for the fourth quarter and $459 per
ounce for 2004.

2004 2003 2002
--------- --------- --------
Gold produced (oz) 33,743 44,124 26,657
Total cash cost ($/oz) $459 $298 $178
Total production cost ($/oz) $534 $326 $188
Gold Reserves (oz year end) 643,800 692,500 291,600

Total capital spending in 2004 was $17.0 million, including $12.8
million for the waste stripping program which was completed in December
2004. The overall stripping ratio in 2004 was 4.82:1, which is projected
to drop to 1.56:1 in 2005.

Black Fox Project

In 2004, Apollo expended $10.7 million on the further development of the
Black Fox property, which is 80 kilometers east of Timmins, Ontario,
Canada. The 2004 development program consisted of the extension of the
existing ramp system down to the 235 meter level and the construction of
a 913-meter drift to allow drilling of the ore body from underground. It
also included the continued drilling from surface of extensions to the
mineralization and identified anomalies. During the year, 210
underground holes were completed totaling 41,065 meters and 105 surface
holes were completed totaling another 43,284 meters. As previously
announced, good gold bearing intersections were achieved within the
mineralized zones and the system remains open along strike and down dip.
Total drilling at the site by Apollo now exceeds 175,000 meters.

In April 2004, the surface drilling program discovered a new mineralized
base metal vein system in the footwall of the Destor-Porcupine Fault. To
date 12 holes have intersected the new zone which consists of two
components of mineralization, the gold bearing quartz breccia veins and
the massive sulphide mineralization (Pb, Zn, Ag). These appear to be two
mineralizing events sharing the same "plumbing system."

During the last quarter the Company commenced base line environmental
studies and the permitting and engaged AMEC Canada to complete the
feasibility study which is scheduled for completion in late 2005. The
feasibility will be based on the 457,000 ounces of open pit reserves
already identified, the new underground mineralization identified by the
2004 drilling program and the new underground mineralization identified
by the 2005 drilling program. The feasibility study will include an
updated estimate of ore reserves.

The Black Fox development project sits astride the Destor-Porcupine (DP)
Fault System, which is a deep break in the Precambrian rocks of the
Abitibi Greenstone Belt. This fault system hosts many of the deposits in
the Timmins area. The system regionally strikes east-west and dips
variably to the south. Black Fox lies on the southern limb of a large
scale fold on a flexure in the DP Fault where the strike changes from
east-west to southeast. Folded and altered ultra mafic and mafic are the
host rocks for mineralization. Gold occurs as free gold in quartz
veining and stock works in altered ultra mafics and in gold associated
with pyrite in altered tholeiitic basalts.

General and Administrative

Apollo incurred $7.1 million and $4.7 million in general and
administrative expenses during 2004 and 2003, respectively. The increase
in general and administrative expenses consisted of legal and accounting
expenses incurred in connection with our financing transactions,
exchange listing fees and also include, our Sarbanes Oxley effort for
the year. The SOX 404 project is the result of federal legislation
passed in 2002 mandating that public companies document and test their
internal control systems. The total estimated cost for this effort will
be approximately $1.0 million for the year.

In the year ended December 31, 2004, we also incurred share-based
compensation of $0.8 million resulting from the issuance of stock
options to our employees compared to $0.4 million in 2003.

Accretion and Royalty

In 2004 the Company accrued accretion expense of $1.4 million relating
to accrued site closure costs at its Florida Canyon and Montana Tunnels
Mines. Accrued site closure costs were increased by $3.4 million
representing Apollo's estimated fair value of the increase in the site
closure and reclamation costs following receipt of a third parties
reclamation report in the fourth quarter 2004. Apollo incurred $0.7
million in royalty expenses for the year 2004, compared to $0.9 million
during 2003. These amounts are attributable to royalties on production
from the Florida Canyon Mine.

Accrued closure costs at the end of 2004 were $26.2 million compared to
$21.6 million at the year end 2003.

Accretion expenses are calculated on a quarterly basis and represent the
amortization of the discounted portion of our future cash outflows for
reclamation. It is calculated by estimating the future costs and the
inflationary rate in the years in which we expect to spend the
reclamation funds. This amount is discounted by an appropriate current
interest rate with the difference expensed as an ongoing accretion

Exploration Expense

The cost of exploration, consisting of drilling and related expenses at
our exploration properties, totaled approximately $1.1 million and $2.1
million for the years ended December 31, 2004 and 2003, respectively.
Drilling and related costs incurred at Black Fox and Standard for
exploration were capitalized.

Other Income/Expenses

Apollo realized interest income of $0.3 million and incurred interest
expense for equipment leases and interest on a bridge loan of $0.5
million in 2004; realized interest income in 2003 was $213,000 and
interest expense was $544,000.

Realized foreign exchange losses from cash balances not held in United
States dollars were $0.7 million in 2004 compared to a gain of $1.3
million in 2003.

Effective January 1, 2004, the Company adopted the CICA Accounting
Guideline 13, Hedging Relationships (AcG-13). AcG-13 specifies the
conditions under which hedge accounting is appropriate and includes
requirements for the identification, documentation and designation of
hedging relationships, sets standards for determining hedge
effectiveness, and establishes criteria for the discontinuance of hedge
accounting. The adoption of AcG-13 had the effect of increasing
unrealized loss on commodity contracts and deferred loss on commodity
contracts of $5.4 million. The first three quarters of 2004 include a
restatement of earnings to include unrealized gains offsetting the
amortization of the deferred commodity contracts in the amount of $0.2

Summary of Results

As a result of these expense components, our operating expenses totaled
$82.1 million for the year ended December 31, 2004, as compared to $70.0
million for 2003. The main differences are due to higher costs of
operations at the mining properties and higher administrative costs.

The result is that Apollo incurred a net loss of $18.2 million, or $0.23
per share, for the year ended December 31, 2004, as compared to a net
loss of $2.2 million, or $0.04 per share, for the year ended December
31, 2003.

Liquidity and Financial Resources

Apollo ended the year 2004 with cash and cash equivalents of $6.9
million as compared to cash and cash equivalents of $31.7 million at the
end of 2003. The Company also maintains restricted cash accounts for its
reclamation obligations at Florida Canyon and Montana Tunnels. At the
end of the year 2004, these accounts totaled $9.4 million, compared to
$6.9 million at December 31, 2003.

The decrease in cash from December 31, 2003, is primarily the result of
operating losses of $7.7 million, capital expenditures of $34.2 million
and additions to the restricted cash account of an additional $2.5
million, partially offset by funds provided by net financing activities
of $19.6 million (discussed below).

Capital expenditures were $34.2 million during the year ended December
31, 2004. The major expenditures were for the Black Fox project ($10.7
million), for the construction of the Standard Mine ($10.6 million) and
additions to deferred stripping costs at Montana Tunnels ($12.8

In 2003, the major uses of cash were for property, plant and equipment
($11.5 million), additions to deferred stripping costs ($8.7 million),
short-term investments ($5.9 million) and for the investment in a
restricted certificate of deposit ($1.6 million).

Approximately $0.5 million of cash available at December 31, 2004, has
been allocated to be spent pursuant to the terms and conditions of a Cdn
$0.75 million private placement of "flow-through" common shares (as
defined in sub-section 66(15) of the Income Tax Act (Canada)).

The Company terminated its loan agreement with the Standard Bank of
London in June of 2004; however, the total transaction will not be
completed until delivery of the final 16,000 ounces of gold into the
"straddle position." It is anticipated that this obligation will be
fully satisfied by the end of April 2005.

Financing Activities

During the year ended December 31, 2004, financing activities provided
$19.6 million in cash, $8.9 million from the exercise of warrants and
options in 2004, $7.5 million from the convertible debenture issuance in
November 2004, $7.0 million from our December share issuance, and
proceeds of $0.5 million from a December 2004 flow through financing.
This inflow of cash was offset by the payment of $4.1 million during the
year to decrease the equipment lease debt.


The Company has equipment leases and loans at both its operations. At
the end of 2004 the current portion of these payables was $2.8 million
with another $0.7 million classified as long-term debt. The values for
year-end 2003 were $4.1 million and $3.3 million, respectively.

Deferred Stripping

The deferred stripping balance as at December 31, 2004, all of which is
for the Montana Tunnels mine, totaled $36.8 million compared to $24.0
million for the year ended December 31, 2003.

Gold Hedges

During 2003, as part of the credit facility with Standard Bank, the
Company entered into hedging contracts for gold in the aggregate amount
of 100,000 ounces involving the use of puts and calls. As at December
31, 2004, there were 16,000 ounces remaining on these contracts. The
contracts continue through April 25, 2005, with a put option strike
price of $295 per ounce and a call option strike price of $345 per
ounce. As at December 31, 2004, the mark to market value of the
outstanding contracts was negative $1.5 million.

Sarbanes Oxley Section 404

Apollo Gold has undertaken an extensive review and assessment of the
design and effectiveness of the Company's internal controls and
procedures. As a result of this assessment management and the audit
committee have identified the following material weaknesses in the
Company's internal control over financial reporting as of December 31,

-- Deficient inventory control and management process and lack of
segregation of procurement and accounting duties at the Florida Canyon

-- Absence of appropriate review of non-routine or complex accounting
matters, related accounting entries, and appropriate documentation,
disclosure and application of Canadian and U.S. GAAP for those matters.

Management has undertaken actions to address the identified material
weaknesses, including the addition of new staff, implementation of new
controls and development of enhanced policies and procedures.

About Apollo Gold

Apollo Gold is a gold mining company with operating mines in Nevada and
Montana and an advanced stage development project, Black Fox, along the
productive Destor-Porcupine Fault east of the Timmins Gold Camp in
Ontario, Canada. Apollo has also recently started the Huizopa
exploration project in the Sierra Madre Mountains of Mexico. Gold
production in 2004 from the Company's three currently operating mines
totaled 106,000 ounces of gold production with by-products of silver,
lead and zinc. The production targets for 2005 range from 122,000 to
151,000 ounces of gold production as well as by-product metal as in
2004. The Black Fox project could be in production in early 2007 if the
feasibility study is successful and necessary financing is obtained.
Production at the Black Fox project envisions an open pit as well as an
underground mine and an on site milling facility.

Forward-Looking Statements

This press release includes certain "Forward-Looking Statements" within
the meaning of section 21E of the United States Securities Exchange Act
of 1934, as amended. All statements regarding potential mineralization,
reserves, exploration results, construction and completion, and
production dates and amounts, and future plans and objectives of Apollo
Gold, are forward-looking statements that involve various risks and
uncertainties. There can be no assurance that such statements will prove
to be accurate and actual results and future events could differ
materially from those anticipated in such statements. Important factors
that could cause actual results to differ materially from these
forward-looking statements include: the results of independent Canadian
NI 43-101 reports, the outcome of assays and additional exploration
sampling and drilling efforts, delay in permits or approvals, technical,
permitting, mining, or processing problems or issues, the availability
of funding on acceptable terms for the future exploration and
development of Apollo Gold mines and projects, and other factors
disclosed under the heading "Risk Factors" 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.


Contact Information

    Apollo Gold Corporation, Denver
    Dave Young
    VP Business Development
    720-886-9656 ext. 117 or Toll-Free: 877-465-3484