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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K


[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003


COMMISSION FILE NUMBER:
001-31593

APOLLO GOLD CORPORATION
(Exact name of registrant as specified in its charter)
_________________


YUKON TERRITORY NOT APPLICABLE
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

4601 DTC Boulevard, Suite 750
Denver, Colorado 80237-2571

(Address of Principal Executive Offices Including Zip Code)

(720) 886-9656
(Registrant's telephone number, including area code)
_________________

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, no par value

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 [_]


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Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [_] No [X]

As of March 15, 2004, the approximate aggregate market value of voting stock
held by non-affiliates of the registrant was $147,811,000 (based upon the
closing price for shares of the registrant's common stock as reported by the
American Stock Exchange on that date). Shares of common stock held by each
officer, director, and holder of 5% or more of the outstanding common stock have
been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

As of March 15, 2004, the registrant had 75,031,198 shares of common stock, no
par value per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the 2004 Annual Meeting of Stockholders are
incorporated by reference in Part III.


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APOLLO GOLD CORPORATION
FORM 10-K
TABLE OF CONTENTS



PART I
- ------


ITEM 1. Business
ITEM 2. Properties
ITEM 3. Legal Proceedings
ITEM 4. Submission Of Matters To A Vote Of Security Holders

PART II
- -------

ITEM 5. Market For Registrant's Common Equity
And Related Stockholder Matters
ITEM 6. Selected Consolidated Financial Data
ITEM 7. Management's Discussion And Analysis Of
Financial Condition And Results Of Operations
ITEM 7A. Quantitative And Qualitative Disclosures
About Market Risk
ITEM 8. Financial Statements And Supplementary Data
ITEM 9. Changes In And Disagreements With Accountants
On Accounting And Financial Disclosure
ITEM 9A. Controls and Procedures

PART III
- --------

ITEM 10. Directors And Executive Officers Of The Registrant
ITEM 11. Executive Compensation
ITEM 12. Security Ownership Of Certain Beneficial Owners
And Management
ITEM 13. Certain Relationships And Related Transactions
ITEM 14. Principal Accounting Fees And Services

PART IV
- -------

ITEM 15. Exhibits, Financial Statement Schedules,
And Reports
On Form 8-K
SIGNATURES
CERTIFICATIONS



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PART I

ITEM 1. BUSINESS

PRELIMINARY INFORMATION

The earliest predecessor to Apollo Gold Corporation was incorporated under
the laws of the Province of Ontario in 1936. In May 2003, it reincorporated
under the laws of the Yukon Territory. Apollo Gold Corporation maintains its
registered office at Suite 300, 204 Black Street, Whitehorse, Yukon Territory,
Canada Y1A 2M9, and the telephone number at that office is (416) 668-5252.
Apollo Gold Corporation maintains its principal executive office at 4601 DTC
Boulevard, Suite 750, Denver, Colorado 80237-2571, and the telephone number at
that office is (720) 886-9656.

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. In this Annual Report on
Form 10-K, unless otherwise specified or the context otherwise requires, all
dollar amounts or references to dollars are expressed in United States dollars.

Unless otherwise specified or the context otherwise requires, in this Form
10-K the terms "we" and "our" in reference to the operations or business of
Apollo Gold Corporation prior to June 25, 2002, shall mean the operations or
business of Nevoro Gold Corporation and its wholly-owned subsidiary Apollo Gold,
Inc. The terms "we" and "our" in reference to the operations or business of
Apollo Gold Corporation on or after June 25, 2002, shall mean the operations or
business of Apollo Gold Corporation, a corporation presently incorporated under
the laws of the Yukon Territory, its wholly-owned subsidiary Apollo Gold, Inc.,
and Apollo Gold Inc.'s material wholly-owned subsidiaries Montana Tunnels
Mining, Inc., Florida Canyon Mining, Inc., Standard Gold Mining, Inc. and Apollo
Gold Exploration, Inc.

INTRODUCTION

We are principally engaged in the exploration, development and mining of
gold. We have focused our mining efforts to date on two principal properties:
our Montana Tunnels Mine, owned by one of our subsidiaries, Montana Tunnels
Mining, Inc. ("Montana, Inc."),and our Florida Canyon Mine, owned by another one
of our subsidiaries, Florida Canyon Mining, Inc. ("Florida, Inc."). Our
development activities involve our Black Fox Property and Standard Mine
project, and our exploration activities involve the Pirate Gold, Nugget Field
and Diamond Hill properties. During 2003, Standard Gold Mining, Inc. acquired
and incorporated into its Standard Mine property additional adjacent land
positions in Buffalo Canyon, and Apollo Gold Exploration, Inc. acquired a new
Willow Creek property.

We are the result of the Plan of Arrangement that resulted in the
amalgamation of International Pursuit Corporation ("Pursuit") and Nevoro Gold
Corporation ("Nevoro"). Pursuant to the terms of the Plan of Arrangement,
Pursuit acquired Nevoro and continued operations under the name of Apollo Gold
Corporation. Through our wholly-owned subsidiary, Apollo Gold, Inc. ("AGI")
(acquired by Nevoro in March 2002), we own the majority of our assets and
operate our business. We continued trading on the Toronto Stock Exchange under
our new name, Apollo Gold Corporation, and with a new ticker symbol, APG.U, on
July 3, 2002. On August 2, 2002, our ticker symbol changed to APG.

In February 2003, we filed a Registration Statement on Form 10 with the
Securities and Exchange Commission ("SEC"). The Registration Statement was
declared effective on August 13, 2003. On August 26, 2003, the Company began
trading on the American Stock Exchange under the ticker symbol AGT.


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We own and operate the Florida Canyon Mine, a low grade heap leach gold
mine located approximately 42 miles southwest of Winnemucca, Nevada. Heap
leaching is a process of extracting gold and silver by placing crushed ore on
sloping, impermeable pads and applying a dilute cyanide solution that dissolves
a portion of the contained gold, which is then recovered. On average, the
Florida Canyon Mine produces approximately 125,000 ounces of gold and
approximately 80,000 ounces of silver annually. During 2003, it produced
101,811 ounces of gold and 60,065 ounces of silver.

We also own and operate the Montana Tunnels Mine, an open pit gold mine
located near Helena, Montana. When in full production, over the past five
years, the Montana Tunnels Mine has produced approximately 78,000 ounces of
gold, 26,000 tons of zinc, 8,700 tons of lead and 1,200,000 ounces of silver
annually. The Montana Tunnels Mine produces approximately 15% of its annual
gold production in the form of dore, an unrefined material consisting of
approximately 90% gold, which is then further refined. The remainder of the
mine's production is in the form of concentrates, one a zinc-gold concentrate
and the other a lead-gold concentrate. The concentrates are shipped to a
smelter, and after smelting charges, we are paid for the metal content. The
Montana Tunnels Mine was idle for approximately four months in 2002 while we
made preparations to begin the removal of waste rock at the mine. Limited
production resumed in October 2002, and full production on the K-Pit resumed in
April 2003. Since that time, the Montana Tunnels Mine has experienced pit wall
problems that have resulted in significant changes to the mine plan, including
an accelerated stripping schedule to remove 10 million tons of material that
slid off the southwest pit wall. In October 2003, a second waste stripping
project ("Phase II") known as the L-Pit project was initiated, and we intend to
pre-strip approximately 17 million tons of waste from the south and west high
walls of the open pit after which the L-Pit should add an additional three to
four years of mine life.

We have two development stage properties, the Black Fox Property ("Black
Fox"), located near Timmins, Ontario, and the Standard Mine Project (including
the new Buffalo Canyon component), owned by our wholly-owned subsidiary Standard
Gold Mining, Inc. located in Nevada. We also have several exploration stage
assets including Willow Creek ("Willow Creek"), Pirate Gold Prospect ("Pirate
Gold") and the Nugget Field Prospect ("Nugget Field"), each located in Nevada
and owned by our wholly-owned subsidiary, Apollo Gold Exploration, Inc. We also
own Diamond Hill Mine ("Diamond Hill"), an exploration asset which is an
unincorporated division of Montana Tunnels Mining, Inc. and located in Montana.

In 2003, we focused our exploration efforts on our Black Fox and Standard
Mine properties. The Black Fox Property is located east of Timmins, Ontario,
and was acquired in September 2002. We currently anticipate that the
development and commercialization of our Black Fox Property will require three
phases. The first phase commenced in early 2003, and involved a shallow
drilling program to test the open pit potential and core drilling of 297 core
holes from 200 to 500 meters in depth. As a result of the core drilling, we
have identified proven and probable reserves at the Black Fox Property.

Upon completion of the first phase, we began the second phase of our Black
Fox project in February 2004. The second phase will provide for the development
of underground access for further exploratory drilling. We are developing an
underground ramp from existing structures. We also plan to begin the permitting
process for the third phase of the Black Fox project, and anticipate that this
process will require approximately two years, based on a plan for combined open
pit and underground mining, with on-site milling, at a capacity of 1500 metric
tons of ore per day. The third phase would include construction of the mine and
processing facilities at an aggregate estimated cost of approximately $45.0
million.

We have continued drilling at the Standard Mine and drilled approximately
80 holes in 2003. The Buffalo Canyon portion of our Standard Mine property is
located immediately south of and contiguous to the pre-existing Standard Mine
property. We acquired Buffalo Canyon in 2003 and completed our Phase I


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drilling program in December 2003. We believe that the northern portion of
Buffalo Canyon has the highest potential for commercialization, and plan to
conduct follow-up drilling in 2004.

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



Years

2003 2002 2001 2000
----------- ----------- ----------- -----------

Gold (ounces) 145,935 148,173 192,887 259,863
Silver (ounces) 471,241 275,925 963,050 1,257,972
Lead (pounds) 10,843,184 5,481,230 13,759,579 12,141,771
Zinc (pounds) 21,792,452 15,328,392 40,158,321 31,689,125

Average metals prices:
Gold - London Bullion $ 364 $ 310 $ 271 $ 279
Mkt. ($/ounce)
Silver - London Bullion $ 4.88 $ 4.59 $ 4.37 $ 5.00
Mkt. ($/ounce)
Lead - LME Cash ($/pound) $ 0.23 $ 0.20 $ 0.216 $ 0.206
Zinc - LME Cash ($/pound) $ 0.38 $ 0.35 $ 0.402 $ 0.512


Note: Includes the operations of Nevoro Gold Corporation and its wholly-owned
subsidiary Apollo Gold, Inc prior to June 25, 2002.

BACKGROUND

We are the result of the Plan of Arrangement that resulted in the
amalgamation of International Pursuit Corporation ("Pursuit") and Nevoro.
Pursuant to the terms of the Plan of Arrangement, Pursuit acquired Nevoro and
continued operations under the name of Apollo Gold Corporation. Through our
wholly-owned subsidiary, AGI (acquired by Nevoro in March 2002), we own the
majority of our assets and operate our business. We continued trading on the
Toronto Stock Exchange under our new name, Apollo Gold Corporation, and with a
new ticker symbol, APG.U, on July 3, 2002. On August 2, 2002, our ticker symbol
changed to APG. In February 2003, we filed a Registration Statement on Form 10
with the SEC. The Registration Statement was declared effective on August 13,
2003. On August 26, 2003, the Company began trading on the American Exchange
under the ticker symbol AGT.

INTERNATIONAL PURSUIT CORPORATION (PRIOR TO THE PLAN OF ARRANGEMENT)

International Pursuit Corporation ("Pursuit") was incorporated under the
laws of the Province of Ontario in 1936, under the name Brownlee Mines (1936)
Limited. Pursuit was a public company engaged in the business of exploration and
development of mineral properties for many years.

Pursuit was involved in the exploration, evaluation and development of
precious and base metal properties, involving primarily copper, for commercial
exploitation. Most of Pursuit's business activities took place in the
Philippines, Indonesia and Mongolia, through joint ventures and contracts of
work to explore and develop mining properties.

For example, in April 1995, Pursuit entered into a joint venture agreement
to explore and develop the Hinoba-an copper deposit, located in the southwest
part of the island of Negros in the Republic of the Philippines. Pursuant to
this agreement, Pursuit earned a 50% interest in the Hinoba-an property by
incurring Cdn$9,600,000 of exploration expenditures and by making aggregate
option payments of Cdn$300,000. In addition, 50% of certain expenditures made
by Pursuit in excess of the Cdn$9,600,000 minimum were to be repaid to Pursuit
with interest. Pursuit also had the right to obtain the remaining 50% interest
in Hinoba-an for a purchase price of Cdn$15,000,000, payable to the joint
venture partner through a net smelter return from anticipated production.
Pursuant to this arrangement, Pursuit expended over Cdn$14,700,000 on the
Hinoba-an property (including option payments and accrued interest) through


6

December 1998 and acquired a 100% interest in the property in 1999 through the
bankruptcy of its joint venture partner. However, during this time the world
price of copper declined, and Pursuit placed the Hinoba-an project on hold. In
December 2001, Pursuit executed an agreement with Hinoba Holdings Limited,
granting an option to acquire all of the rights to the Hinoba-an project for
7.5% of Hinoba Holdings Limited shares and $5 million payable within 18 months
of having achieved commercial production. Neither party fully performed under
that agreement. Pursuit discontinued efforts to exploit or sell the project,
and halted financing to the subsidiary holding the underlying title to the
Hinoba-an property. In 2003, Apollo Gold Corporation sold its remaining
interest in this project, including its equity interests in the subsidiary
holding title to the Hinoba-an project and the contingent $5 million receivable,
for $76,287. In connection with that transaction, Hinoba Holdings Limited
released us from and agreed to indemnify us against any past, present or future
third party claims associated with the Hinoba-an project. We no longer hold any
interest in Pursuit's former Philippine Islands properties.

Pursuit's Indonesian transactions were in the form of contracts of work
("CoWs"), project-specific agreements granted by the President of Indonesia,
with terms of approximately 30 years. After conducting preliminary negotiations
for a number of CoWs, in February 1998 Pursuit entered into two CoWs for the
Mahakan East and Mahakan West properties in Indonesia, and paid a security
deposit of $100,000 for each property plus a bank guarantee of $0.60 per hectare
less the security deposit. Pursuit also obtained temporary exploration licenses
for each property. In 1998, Pursuit expended approximately Cdn$1,066,000 on the
exploration of the Indonesian properties.

As the world price of copper declined significantly in the late 1990s and
third world countries experienced recessions and, in the case of Indonesia,
political unrest, Pursuit adopted a policy designed to maintain its mineral
properties in good standing and to seek out joint venture partners until such
time as world copper prices recovered and the political situation in Indonesia
stabilized. We are not currently maintaining the corporate franchises of, or
otherwise financially supporting, Pursuit's discontinued Indonesian
subsidiaries.

In 1999 and 2000, Pursuit also investigated business opportunities outside
the mining industry. In June 1999, Pursuit entered into a joint venture with
StockSet Associates to develop and manage a financial Internet site through a
newly formed corporation, StockSet.com. Pursuit invested $61,142 for a 50%
interest in StockSet.com. In March 2000, Pursuit sold its interest in
StockSet.com to a company controlled by a relative of a then-officer and
director of Pursuit for consideration of Cdn$500,000.

In November 2001, Pursuit was notified by the Toronto Stock Exchange
("TSX") that its shares would be delisted if it did not comply with the TSX's
continued listing requirements within 120 days. Pursuit then sought out
potential acquisition and merger opportunities, which eventually led it to
amalgamate with Nevoro Gold Corporation.

NEVORO GOLD CORPORATION (PRIOR TO THE PLAN OF ARRANGEMENT)

Nevoro was a private company incorporated under the Canada Business
Corporations Act in February 2002. In March 2002, Nevoro acquired all of the
outstanding common stock of AGI. The acquisition included AGI's wholly-owned
subsidiaries, Montana, Inc. and Florida, Inc.

AGI was originally incorporated under the General Corporation Law of the
State of Delaware on December 16, 1998. AGI commenced business on February 5,
1999, pursuant to a plan of reorganization ("Plan of Reorganization") involving
Pegasus Gold International, Inc. ("PGII"), Diamond Hill Mining, Inc. ("Diamond
Hill, Inc."), Florida Canyon Mining, Inc. ("Florida, Inc."), and Montana Tunnels
Mining, Inc. ("Montana, Inc."), all of whom voluntarily filed for protection
under Chapter 11 of the United States Bankruptcy Code on January 16, 1998.


7

Under the Plan of Reorganization, PGII was reincorporated in Delaware and
renamed Apollo Gold, Inc., and its common stock was distributed to certain
former creditors of PGII, Diamond Hill, Inc., Florida, Inc. and Montana, Inc.
AGI became the parent holding company for the reorganized Diamond Hill, Inc.,
Florida, Inc., and Montana, Inc. entities, all of which were also reincorporated
in Delaware but retained their former names. Under the Plan of Reorganization,
AGI and its three subsidiaries were discharged from all liabilities not asserted
prior to the applicable bar dates or otherwise provided for in the Plan of
Reorganization to the maximum extent permitted by the United States Bankruptcy
Code. Following emergence from bankruptcy protection, AGI and its subsidiaries
carried on mining and exploration activities under new management and with the
benefit of the protection afforded by the Plan of Reorganization and the United
States Bankruptcy Code against unsatisfied liabilities associated with its
former ultimate parent company Pegasus Gold Inc. ("PGI") and other former PGI
affiliates.

On January 1, 2002, Diamond Hill, Inc. was merged into Montana, Inc. and
became an unincorporated division of Montana, Inc. On March 26, 2002, Nevoro
acquired 100% of the common stock of AGI from a shareholder group controlled by
a syndicate of banks through the merger of Nevoro Gold USA Inc., a Delaware
corporation and wholly-owned subsidiary of Nevoro, with and into AGI, resulting
in AGI becoming a wholly-owned subsidiary of Nevoro.

PURSUIT AND NEVORO PLAN OF ARRANGEMENT

On June 25, 2002, as a result of Pursuit's extensive search for acquisition
and merger opportunities and after extensive discussions and negotiations,
Pursuit and Nevoro obtained court approval for the Plan of Arrangement that
formed Apollo Gold Corporation. On March 24, 2002, Pursuit conducted a private
placement of $23 million principal amount of 0.0% secured convertible debentures
and related warrants (the "Debentures") through registered dealers (the
"Agents") on a best efforts agency basis. In connection with the private
placement of Debentures, Pursuit issued compensation warrants (the "Compensation
Warrants") to the Agents to purchase an aggregate of 718,750 shares of our
common stock at an exercise price of $1.60 with such warrants being exercisable
for two years from the date of issuance. Approximately $11 million of the
proceeds from the sale of the Debentures were loaned by Pursuit to Nevoro to
facilitate the acquisition of Apollo Gold, Inc., and the remaining amount was
used to fund our operations, including the Montana Tunnels Mine pre-stripping
project.

The Plan of Arrangement involved the following steps, which were deemed to
have occurred in the following order on June 25, 2002 (the "Effective Date"):

(a) the outstanding shares of Pursuit (the "Pursuit Shares") (excluding
any Pursuit Shares issued pursuant to the conversion of the Debentures or issued
upon exercise of the Compensation Warrants) were consolidated (the "Pursuit
Share Consolidation") on a basis of one Pursuit Share for each 43.57 Pursuit
Shares previously held by the Pursuit shareholders;

(b) the terms of each of Pursuit's outstanding common share options
(the "Pursuit Options") were amended to: (i) consolidate the number of Pursuit
Shares which the holder of the Pursuit Option was entitled to acquire upon the
exercise thereof on the basis of one Pursuit Share for every 43.57 Pursuit
Shares which the Pursuit Option previously entitled the holder to acquire; and
(ii) to increase the purchase price of the Pursuit Shares which the Pursuit
Option entitled the holder to acquire by the amount stipulated by the terms
governing such Pursuit Option in the event of a consolidation in the share
capital of Pursuit;

(c) all of the outstanding Debentures were converted into the
underlying Pursuit Shares and common share purchase warrants of Pursuit (the
"Pursuit Warrants") in accordance with their terms;


8

(d) immediately following the Pursuit Share Consolidation, all of the
Pursuit Shares outstanding on the Effective Date were exchanged for shares of
our common stock on the basis of one share for each one Pursuit Share held;

(e) all of the outstanding Pursuit Options (as amended in accordance
with paragraph (b) above) were exchanged for options to acquire shares of our
common stock on the basis of one option for each Pursuit Option held;

(f) all Pursuit Warrants outstanding on the Effective Date were
exchanged for warrants to purchase shares of our common stock on the basis of
one warrant for each one Pursuit Warrant held;

(g) all Compensation Warrants outstanding on the Effective Date were
exchanged for warrants to purchase shares of our common stock on the basis of
one warrant for each one Compensation Warrant held;

(h) all Nevoro common shares outstanding on the Effective Date were
exchanged for an aggregate of 1,970,000 shares of our common stock; and

(i) Pursuit acquired Nevoro and the operations of Pursuit and Nevoro
were merged.

APOLLO GOLD CORPORATION

The following chart illustrates our operations and principal operating
subsidiaries, their jurisdictions of incorporation and the percentages of their
voting securities beneficially held by us as of March 15, 2004.



Apollo Gold Corporation
(Yukon Territory)
|
100%
|
Apollo Gold, Inc.
(Delaware)
|
|

100% 100% 100% 100% 100%
| | | | |
- --------------------------------------------------------------------------------------------------
| | | | |
Montana Tunnel Florida Canyon Apollo Gold Standard Gold Mine Development
Mining, Inc. Mining, Inc. Exploration, Inc. Mining, Inc. Finance Company
("Montana, Inc.") ("Florida, Inc.") (Delaware) ("Standard, Inc.") ("MDFC")
(Delaware) (Delaware) (Delaware) (Delaware)



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NOTES:

APOLLO GOLD CORPORATION: American Stock Exchange listed and Toronto Stock
Exchange listed holding company; owns and operates the Black Fox development
Property.

APOLLO GOLD, INC.: United States holding company employing United States
corporate officers and furnishes corporate services.

MONTANA, INC.: Owns and operates the Montana Tunnels Mine and Diamond Hill
Mine, an exploration property.

FLORIDA, INC.: Owns and operates the Florida Canyon Mine.

APOLLO GOLD EXPLORATION, INC.: Holds United States exploration land positions
not tied to any existing operating subsidiary.

STANDARD GOLD MINING, INC.: Owns and operates the Standard Mine development
project.

MINE DEVELOPMENT FINANCE COMPANY: Provides intercompany loans and other
financial services to affiliated companies.

PRODUCTS

Our mines primarily produce gold but also yield quantities of silver, zinc
and lead. We sell gold and these other metals principally to custom smelters
and metals traders. The percentage of sales contributed by each class of
product is reflected in the following table:

Periods


Product 2003 2002 2001 2000
- ------------ ----- ----- ----- -----

Gold 79% 85% 67% 72%
Zinc 13% 11% 20% 17%
Other metals 8% 04% 13% 11%


GOLD

GOLD PRODUCTION

We produced 145,935 ounces of gold during the year ended December 31, 2003.
We produced 148,173 ounces of gold in the year ended December 31, 2002, and
192,887 ounces and 259,863 ounces in the years ended December 31, 2001 and 2000,
respectively. For the year ended December 31, 2003, 70% of our gold production
came from our Florida Canyon Mine, and 30% from our Montana Tunnels Mine. In
2002, 82% of our gold production came from our Florida Canyon Mine, and 18% from
our Montana Tunnels Mine. Approximately 63% of our gold production in 2001 came
from our Florida Canyon Mine and the remaining 37% from our Montana Tunnels


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Mine. In 2000, 65% of our gold production came from our Florida Canyon Mine,
and 35% from our Montana Tunnels Mine.

GOLD USES

Gold is used for two primary purposes: product fabrication and bullion
investment. Fabricated gold has a variety of end uses, including jewelry,
electronics, dentistry, industrial and decorative uses, medals, medallions and
official coins. Gold investors purchase gold bullion, official coins and
high-carat jewelry.

Most of our revenue is derived from the sale of refined gold in the
international market. However, our end product is dore bars. Because dore is
an alloy consisting primarily of gold but also containing silver and other
metals, dore bars are sent to refiners to produce bullion that meets the
required market standard of 99.95% pure gold. Under the terms of our refining
contracts, the dore bars are refined for a fee, and our share of the refined
gold and the separately recovered silver is paid to us.

GOLD SUPPLY

The worldwide supply of gold consists of a combination of new production
from mining and existing stocks of bullion and fabricated gold held by
governments, financial institutions, industrial organizations and private
individuals.

GOLD PRICES

The price of gold is affected by numerous factors that are beyond our
control. See "Risk Factors - Risks Relating to the Metals Mining Industry".

The following table presents the annual high, low and average afternoon
fixing prices over the past three years, for gold per ounce on the London
Bullion Market:


Year High Low Average
- ---- ---- --- -------
2001 $ 293 $ 256 $ 271
2002 $ 348 $ 278 $ 310
2003 $ 417 $ 319 $ 363

SILVER AND OTHER METALS

SILVER. We produced 471,241 ounces of silver during the year ended
December 31, 2003, 275,925 ounces in the year ended December 31, 2002, and
963,050 ounces and 1,257,972 ounces in the years ended December 31, 2001 and
2000, respectively. Our silver production is obtained from mining operations in
which silver is not our principal or primary product, but is produced as a
by-product of mining gold deposits. For the year ended December 31, 2003, 13%
of our silver production came from our Florida Canyon Mine, and 87% from our
Montana Tunnels Mine. Approximately 74% of our silver production came from our
Montana Tunnels Mine and the remaining 26% from our Florida Canyon Mine in the
year ended December 31, 2002. Silver has traditionally served as a medium of
exchange, much like gold. While silver continues to be used for currency, the
principal uses of silver are for industrial uses, primarily for electrical and
electronic components, photography, jewelry and silverware. Silver's strength,
malleability, ductility, thermal and electrical conductivity, sensitivity to
light and ability to endure extreme changes in temperature combine to make


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silver a widely used industrial metal. Specifically, it is used in photography,
batteries, computer chips, electrical contacts, and high technology printing.
Silver's anti-bacterial properties also make it valuable for use in medicine and
in water purification.

OTHER METALS. Production from the Montana Tunnels Mine also includes the
extraction, processing and sale of zinc and lead contained in sulfide
concentrates. Due to its corrosion resisting property, zinc is used primarily
as the coating in galvanized steel. Galvanized steel is widely used in
construction of infrastructure, housing and office buildings. In the automotive
industry, zinc is used for galvanizing and die-casting, and in the vulcanization
of tires. Smaller quantities of various forms of zinc are used in the chemical
and pharmaceutical industries, including fertilizers, food supplements and
cosmetics, and in specialty electronic applications such as satellite receivers.

The primary use of lead is in motor vehicle batteries, but it is also used
in cable sheathing, solder in printed wiring circuits, shot for ammunition and
alloying. Lead in chemical form is used in alloys, glass and plastics.

The price of silver, lead and zinc is affected by numerous factors that are
beyond our control. See "Risk Factors - Risks Relating to the Metals Mining
Industry".

REFINING PROCESS

We have agreements with Johnson Matthey to refine our gold dore to a final
finished product. Johnson Matthey receives $0.50 for each ounce of gold it
refines, in addition to receiving a fee of 0.50% of the payable metal for silver
and 0.10% of the payable metal for gold.

Our lead and zinc concentrates are shipped to Teck Cominco Metals Ltd.
("Teck Cominco") in British Columbia, Canada. Teck Cominco's smelter is located
in Trail, British Columbia, and is approximately five hours, via train, from the
Montana Tunnels Mine. In order to alleviate as much risk as possible regarding
the smelting process, we have chosen to enter into a contract with Teck Cominco
until March 2005. For further information see "Florida Canyon Mine and Montana
Tunnels Mine."

ITEM 2. PROPERTIES

MINING PROPERTIES AND OPERATIONS

Through our two wholly-owned subsidiaries, Florida, Inc. and Montana, Inc.,
we have two currently operating mines: the Florida Canyon Mine, a low grade heap
leach gold mine, and the Montana Tunnels Mine, a gold mine.

The following table presents certain information regarding our metal mining
properties, including the relative percentage each contributed to our sales for
the year ended December 31, 2003:



Name of Ownership Percentage of
Property Interest 2003 Sales
- ------------------------- ---------- --------------

Montana Tunnels Mine 100% 46%
Florida Canyon Mine 100% 54%



12

Florida, Inc. and Montana, Inc. land holdings are primarily divided into
two categories, unpatented mining claims and fee acreage/patented mining claims.

Our unpatented mining claims require annual filings with the United States
Bureau of Land Management and the county where the claims are held. A $100 per
claim maintenance fee is paid to the United States Bureau of Land Management on
or before September 1 of each year. An affidavit of notice of intent to hold
unpatented mining claims and notice of maintenance fee payment in lieu of
assessment work is filed with the county recorder on or before November 1 of
each year. The notices and fees are filed and paid on a yearly basis and
currently all claims are in good standing.

Fee acreage/patented mining claims are lands owned by us. To the best of
our knowledge, our owned patented claims have been legally located, documented,
recorded and maintained in compliance with applicable state and federal laws,
and there are no violations of, or defaults under, any obligation of such lands.

We also have various leases and agreements for small parcels of land. To
our knowledge, each lease is in full force and effect and valid and enforceable
in accordance with its terms.

GLOSSARY OF TERMS

The following are definitions of certain abbreviations used in this
Business section:

"AG" means silver.

"AU" means gold.

"AUEQ" means gold equivalent.

"FE" means iron.

"FLOTATION" means a concentration process selectively attaching valuable
minerals to air bubbles in a chemical solution.

"GPM" means gallons per minute.

"ISO" means International Standards Organization.

"MA" means million years before present.

"NPI" means net profit interest, a royalty based on the market value of the gold
produced less the cost of refining and transportation.

"NSR" means net smelter return.

"ORE" means material that can be economically mined and processed.

"OZ AG/TON" means ounces silver per short ton (oz/ton).


13

"OZ AU/TON" means ounces gold per short ton (oz/ton).

"PB" means lead.

"ROM" means run of mine (leaching of uncrushed materials).

"RQD" means rock quality designation.

"RC OR RVC" means reverse circulation drilling method.

"STRIP (OR STRIPPING) RATIO" means the tonnage of waste material removed to
allow the mining of one ton of ore in an open pit.

"SULFIDE ORE" means mineralization contained in the form of a sulfide.

"T" or "TON" means short ton.

"TPD" means short tons per day.

"ZN" means zinc.

FLORIDA CANYON MINE

The Florida Canyon Mine is owned and operated by Florida, Inc. Florida
Canyon Mine is a low grade, open pit, heap leach operation located near
Winnemucca, Nevada. Daily production totals approximately 30,000 tons of
crusher ore (ore that is crushed to specified grades) and run-of-mine ore
(uncrushed ore) that is placed on a permanent leach pad for heap leaching to
recover gold and silver. The Florida Canyon Mine has operated since 1986. For
the year ended December 31, 2003, a total of 8,625,912 tons containing 132,232
ounces of gold had been placed on the leach pad and 101,811 ounces of gold had
been recovered. Slightly lower amounts of silver have also been recovered.

The Standard Mine is a development project located south of the Florida
Canyon Mine and is currently owned by Standard Gold Mining, Inc. Historically,
the Standard Mine project assets have been part of the Florida Canyon Mine and
therefore the production and other information in this Annual Report on Form
10-K for the Florida Canyon Mine includes data for the Standard Mine project.
However, in the fourth quarter of 2003 we transferred the Standard Mine project
assets into one of our wholly-owned subsidiaries, Standard Gold Mining, Inc.

Location. The Florida Canyon Mine is located about 42 miles south of
Winnemucca, Nevada, just off Interstate 80 at the Humboldt exit. The pits, waste
dumps, and facilities are located in sections 1, 2, 3, 10, 11, and 12 of T31N,
R33E and sections 34, 35 of T32N, R33E Mount Diablo Base & Meridian, Pershing
County, Nevada. The approximate location of the deposit is longitude 118 14'
and latitude 40 35'. The Standard Mine Area is located approximately five miles
south of the Florida Canyon Mine.

Land Area. The land that we own, lease or control at the Florida Canyon
Mine covers a total of 15,456 acres. Fee lands total 4,075.81 acres, while 19
patented claims total 359.9 acres. We also maintain 579 unpatented claims that
total 11,580 acres. The fee lands and patented claims and most of the unpatented


14

claims have been surveyed. Land lease and option payments and unpatented claim
maintenance fees total $823,975 for 2002 and 2003, after which the total land
cost drops to $115,900 annually. The Florida Canyon Mine operating permit area
contains 5,522 acres. We have disturbed approximately 1,958 acres of land,
consisting of 1,034 acres of public lands and 923 acres of fee (private) lands.
Mining the remaining reserves will add 77 acres of disturbance, of which 24
acres are public lands and 53 acres are private lands. We expect approval in
late June 2004 to mine the additional reserves. The land that we own or lease
at the Standard Mine covers a total of 6,087 acres, and fee lands total 1,926.89
acres. We also maintain 208 unpatented claims that total 4,160 acres at the
Standard Mine.

Production. We have historically processed approximately 10 million tons
of ore annually at the Florida Canyon Mine. Approximately 45% of the ore is
crushed to 80% passing 0.75 inch and 55% of the ore is run-of-mine ore placed
directly on the leach heap. Production from the Florida Canyon Mine operation
is summarized in Table 1.

This table presents data from the Florida Canyon Mine property. All
production is subject to a 2.5% net smelter return (NSR) royalty.

TABLE 1 FLORIDA CANYON PRODUCTION HISTORY



MINE
REPORT CRUSHER REPORT RUN OF MINE TOTAL ORE (FROM CRUSHER REPORT) WASTE
- ------ ------------------------- ----------------------- -------------------------- -------------------------------
YEAR MINE GRADE GOLD CRUSHER GRADE GOLD RUN OF MINE GRADE GOLD TOTAL ORE GRADE GOLD TONS
ORE TONS OZ AU/T OUNCES ORE TONS OZ AU/ OUNCES ORE TONS OZ AU/T OUNCES TONS OZ AU/T OUNCES WASTE
000'S 000'S 000'S TONS 000'S 000'S TONS 000'S 000'S TONS 000'S 000'S
- ------ -------- ------- ------ -------- ------ ------ -------- ------- ------ ------ ------- ------ ------

1999 5,584 0.0262 146 5,441 0.0261 142 7,394 0.0123 91 12,835 0.0182 233 4,545
2000 4,596 0.0297 137 4,815 0.0299 144 5,702 0.0123 70 10,516 0.0203 214 12,676
2001 3,593 0.0208 75 3,719 0.0207 77 6,035 0.0116 70 9,754 0.0151 147 15,808
2002 4,368 0.0228 100 4,221 0.0229 97 4,098 0.0119 49 8,319 0.0175 146 13,566
2003 3,804 0.0203 77 2,806 0.0203 77 4,822 0.0114 55 8,625 0.0153 132 11,079
- ------ -------- ------- ------ -------- ------ ------ -------- ------- ------ ------ ------- ------ ------
TOTALS 21,945 0.0244 535 22,022 0.0244 537 28,051 0.0119 335 50,049 0.0174 872 57,674


Mining Claim Description. Mining operations and facilities are on Sections
1, 2, 3, 10, 11, and 12 of T31N, R33E, Mount Diablo Base and Meridian, Pershing
County, Nevada. The mineralization and facilities extend to the north in
Sections 34 and 35 of T32N, R33E, Mount Diablo Base and Meridian. Usually only
36 sections are in each township, however, in T31N, R33E, Sections 37, 38, and
39 are included due to old government surveying problems leaving gaps between
the normal sections.

Agreements and Encumbrances. All current reserves at the Florida Canyon
Mine deposit are subject to a 2.5% net smelter return royalty. Other Florida
Canyon Mine property is subject to royalties shown in Table 2.

TABLE 2 ROYALTY AGREEMENTS




Ranleigh International Corp. 2.5% NSR +8 Square Mile Area Centered on Florida Canyon
Mine
Asarco, McCullough 2.0% NPI NE1/4 of NE1/4 Section 11 T31N R33E
Hall 2.5% NSR Madre & Calaveras Patented Claims, Sections 2 &12
T31N, R33E
Muller Investments 1.0% NSR NE1/4 of NW1.4; S1/2 of NW1/4, Section 1 T30N
R33E


We have paid royalties of $898,104, $508,000 and $0, respectively, in the
years ended December 31, 2003, 2002 and 2001.


15

The annual holding costs of Florida Canyon Mine, exclusive of property
taxes, are shown in Table 3.


16

TABLE 3 FLORIDA, INC. & STANDARD GOLD MINING, INC. LAND HOLDING COSTS



PROPERTY 2002 2003 ANNUAL AFTER 2003 ROYALTY
- ---------------------- -------- -------- ------------------ --------

Hanna Hall $ 7,200 $ 7,200 $ 7,200 2.5% NSR
Asarco $ 10,000 $ 10,000 $ 10,000 1.0% NPI
Herbert McCullough 1.0% NPI
Ranleigh International 2.5% NSR
Campbell $ 40,000 $471,175
Campbell $ 54,000 $110,000
Rex Resources $ 6,000 $ 11,000
Muller Investments $ 20,000 $ 20,000 $ 20,000 1% NSR
Unpatented Claims $ 55,100 $ 78,700 $ 78,700
TOTALS $192,300 $708,075 $ 115,900


Mine equipment at our Florida Canyon Mine is held under installment
purchase agreements and capital leases with Caterpillar Financial Services
Corporation and a capital lease with ATEL Equipment Leasing. The total initial
purchase price of mine equipment was approximately $34.72 million. As of
February 29, 2004, the balance owed was approximately $4.56 million.

At February 29, 2004, the net book value of the Florida Canyon Mine and its
associated plant and equipment was approximately $9.55 million.

Environmental Liabilities. The Florida Canyon Mine has been in continuous
operation since 1986. The original permit to operate was granted by the U.S.
Bureau of Land Management ("BLM") and the Nevada Department of Environmental
Protection ("NDEP") Reclamation Permit 126. The remaining reserves are the
subject of the 17 sequentially numbered amendments to the Florida Canyon Mine
operating plan. The current permit area encompasses approximately 5,522 acres of
privately owned Florida, Inc. lands and BLM-administered public lands. The 17th
amendment ("APO 17") did not propose any new disturbance; however, overall
authorized disturbance within the permit area was reduced by 5.9 acres. Florida,
Inc.'s existing and approved operations comprise a total of 1,957.5 disturbance
acres consisting of 1,034.1 acres of disturbance on public land administered by
the BLM, and approximately 923.4 acres of disturbance on private land. An 18th
amendment ("APO 18") was submitted in December 2003 seeking approval to mine
additional reserves identified in the Switchback Pit area and expand the
existing heap leach pad to accommodate approximately 20 million tons of ore. An
environmental assessment is currently being prepared by a third-party
contractor. Any development of additional reserves will require additional
amendments.

We are required to maintain reclamation bonds covering the costs of
reclaiming all disturbances at our mines as established by regulatory
authorities from time to time. Bonding requirements for the Florida Canyon Mine
were met by the following bond instruments:


17




TYPE OF BONDING PENAL SUM AS AT YEAR END
- --------------------------------------------------------------- ------------- ------------
2002 2003
------------- ------------

Unsecured surety bond issued by Safeco and subject to the final
judgment described below: $ 16,936,130 $ 16,936,130
- --------------------------------------------------------------- ------------- ------------
Unsecured surety bond issued by Safeco pursuant to the
"Montana Settlement Agreement" described below: $ 520,000 $ 520,000
- --------------------------------------------------------------- ------------- ------------
Personal bond secured by irrevocable stand-by letter of credit
issued by Washington Mutual Bank: $ 3,537,745 $ 3,703,149
- --------------------------------------------------------------- ------------- ------------
TOTAL BONDING REQUIREMENT MET: $ 20,993,875 $ 21,159,279
- --------------------------------------------------------------- ------------- ------------


The first two reclamation bonds totaling $17,456,130 were issued by Safeco
Insurance Company of America ("Safeco"). In 1999, Safeco cancelled the first
bond in the amount of $16,936,130; however, prior to the effective date of
cancellation, the U.S. District Court for the District of Nevada entered a
declaratory judgment holding that Safeco's cancellation does not affect the
BLM's right to treat the bond as remaining "outstanding" as part of the required
bonding for the Florida Canyon Mine and that ongoing mining under our plan of
operation does not affect Safeco's obligations under the bond upon eventual
completion of mining. In reliance on that judgment, BLM has counted the
cancelled Safeco bond towards satisfaction of our bonding requirements and has
permitted us to continue to mine both inside and outside the area covered by the
cancelled Safeco bond. On May 29, 2003, a not-for-publication memorandum
decision was delivered by a three-judge panel of the Ninth Circuit Court of
Appeals affirming the U.S. District Court judgment in our favor. Safeco did not
file notice of any further appeal within the period permitted, and the District
Court judgment has become final. A more complete description of the litigation
among Safeco, the United States, the State of Nevada, and us with respect to the
cancelled Safeco bond is included below under "Legal Proceedings". In view of
Safeco's cancellation of the bond, Safeco has not invoiced us for, and we have
not paid, any premium on, the cancelled Safeco bond since August 15, 1999.
Safeco's future intention with respect to the cancelled bond is not known.

The unsecured Safeco-issued bond in the amount of $16,936,130 covers only
disturbances within the area disturbed as of August 15, 1999, and further
disturbances within that area. The second Safeco bond in the amount of $520,000
carries an annual bond premium of $6,500. Safeco issued that bond in 2001 under
a settlement agreement preventing cancellation until May 1, 2003. Safeco has
extended the $520,000 bond to May 1, 2004, and has advised that it will further
extend the bond to May 1, 2005. That bond was furnished by Safeco as part of
its obligations under the settlement agreement resolving related litigation
involving Safeco, Diamond Hill, Inc., the United States, and the State of
Montana as more completely described below under "Legal Proceedings". The
$520,000 Safeco bond covers all disturbances within the Florida Canyon Mine
site's area of operations.

The $3,527,270 personal bond issued to Florida, Inc. is secured by an
irrevocable stand-by letter of credit in the same amount issued by Washington
Mutual Bank for the benefit of BLM. We are required to maintain a deposit
account pledged to Washington Mutual Bank equal to 100% of the amount available
for drawing under the letter of credit to secure Washington Mutual Bank's
obligations under the letter of credit. We pay annual letter of credit fees
equal to 1.5% of the face amount of the letter of credit. We earn interest on
the pledged deposit account at the rate established by Washington Mutual Bank
from time to time.


18

We have not yet made arrangements for meeting increased bonding
requirements likely to be imposed in connection with mine expansion plans
scheduled for 2004.

The bonding requirements for the Standard Mine development project were met
by the following bond instruments:




TYPE OF BONDING PENAL SUM AS AT YEAR END
- -------------------------------------------------------------- ---------------------------
SECURITY 2002 2003
- -------------------------------------------------------------- ------------- ------------

Personal bond secured by irrevocable stand-by letter of credit
issued by Washington Mutual Bank: $ 96,410 $ 96,410
- -------------------------------------------------------------- ------------- ------------
Personal bond secured by pledge of deposit account maintained
with Washington Mutual Bank: $ 8,500 $ 8,500
- -------------------------------------------------------------- ------------- ------------
REQUIREMENT MET: $ 104,910 $ 104,910
- -------------------------------------------------------------- ------------- ------------


The $96,410 personal bond is secured by an irrevocable stand-by letter of
credit in the same amount issued by Washington Mutual Bank for the benefit of
BLM. We are required to maintain a deposit account pledged to Washington Mutual
Bank equal to 100% of the amount available for drawing to secure Washington
Mutual Bank's obligations under the letter of credit. We pay annual letter of
credit fees equal to 2.0% of the face amount of the letter of credit. We earn
interest on the pledged deposit account at the rate established by Washington
Mutual Bank from time to time. The $8,500 personal bond is secured by direct
pledge to BLM of a certificate of deposit equal to 100% of the penal sum of the
bond. We do not pay any fees. We earn interest on the pledged certificate of
deposit at the rate established by Washington Mutual Bank from time to time. We
intend to substitute Standard, Inc. for Florida, Inc. as bond principal on all
bonding for the Standard Mine area. The bonding requirement will increase by a
material amount upon approval of the Standard Mine area permit applications that
are currently pending prior to commencement of mining scheduled for 2004. We
have not yet arranged for issuance of bonding to cover mining operations.

Like all mine operators, we always face the risk of redetermination of
bonding requirements as a result of changes in regulatory agency assumptions and
methodology used to establish bonding requirements, and there can be no
assurance that our bond requirements will remain the same.

As of December 31, 2003, we estimate accrued closure costs at the Florida
Canyon Mine to be an aggregate of $12.5 million (including severance costs of
$1.6 million), of which $1.0 million has already been completed. Following
approval of APO 18, internal closure costs are estimated to increase to
approximately $15.1 million, of which $2.0 million will be completed in 2004.
The $15.1 million post-APO 18 closure costs do not include employee severance.

Florida Canyon Mine and Standard Mine Area Geology. The Florida Canyon
Mine and Standard Mine Area deposits are situated in the Basin and Range
physiographic province of northwestern Nevada, typified by a series of
northward-trending elongated mountain ranges separated by alluvial valleys. The
deposits are located in the Humboldt Range, which is formed by north-trending
folding and faulting.

The Florida Canyon and Standard Mine Area are dominated by a major regional
structural zone, termed the Humboldt Structural Zone, which is a 200 km wide
northeasterly-trending structural zone with left-lateral strike slip movement.
Permo-Triassic rocks of the Rochester Rhyolite, Prida Formation, Natchez Pass
Formation, and Grass Valley Formation are all exposed in the Florida Canyon


19

area. The Humboldt City Thrust separates the Natchez Pass and Grass Valley
formations from the underlying Prida Formation. There is a strong N30 degrees E
to N50 degrees E structural fabric prevalent in and adjacent to the Florida
Canyon Mine and Standard Mine deposits, as evidenced by the alignment of quartz
veining, shear zones, and well-developed joint sets.

Mineralization at the Florida Canyon Mine consists of native gold and
electrum, an alloy of gold and silver associated with quartz, iron oxides,
pyrite, marcasite, and arsenopyrite. Quartz is the major gangue mineral.
Secondary minerals identified in the Florida Canyon Mine deposits include gypsum
(likely remobilized from the Grass Valley Formation), alunite, barite, native
sulfur, calcite, dolomite, anhydrite, pyrargyrite, pyrrhotite, and stibnite.

Gold mineralization at the Standard Mine Area deposits also consists of
native gold and electrum generally associated with silicification and
argillization at the contact between Grass Valley argillite and the underlying
Natchez Pass limestone.

Florida Canyon Mine and Standard Mine Area Drilling and Sampling. The
Florida Canyon Mine property is situated in the Imlay Mining District in
Pershing County, Nevada. Historically, the only significant gold production in
the area came from the Standard Mine between 1939 to 1942 and 1946 to 1949.
Modern exploration at Florida Canyon Mine began in 1969. It has been explored
by five different mining and exploration companies. Table 4 summarizes the
drilling on the Florida Canyon Mine property between 1969 and December 31, 2003,
which totals over 1.9 million feet in 4,476 drill holes; this also includes 857
holes totaling 240,139 feet that were drilled in the Standard Mine Area.

TABLE 4 FLORIDA CANYON MINE AND STANDARD MINE DRILL HOLE DATABASE SUMMARY



(Florida Canyon Mine Area Drilling)

DRILL TYPE NUMBER OF HOLES FOOTAGE
--------------- ---------

Core 55 34,522
Reverse Circulation & Rotary 3,561 1,598,052
TOTAL 3,616 1,632,574
Number of Samples 299,304

(Standard Mine Area Drilling)

DRILL TYPE NUMBER OF HOLES FOOTAGE
--------------- ---------
Core 11 1,983
Reverse Circulation & Rotary 842 237,005
TOTAL 853 238,988
Number of Samples 43,892


The reverse circulation drilling we have completed is done wet from the
surface, with a 10 to 15 lb sample collected from a wet rotary splitter.
American Assay Labs of Sparks, Nevada completed most of the analyses of Florida
Canyon drill hole samples. Gold analysis is by standard fire assay with either
atomic absorption or gravimetric finish.


20

About 10% of the drill samples we have completed were analyzed in
duplicate. Mine Development Associates, an independent mining testing firm,
examined the checked assay data which showed good correlation between the
original and duplicate data. In addition to internal checks, American Assay
continually monitors the laboratory performance of our independent consultants.

Drill Hole Spacing. Measured oxide resources for the Florida Canyon Mine
are classified as those model blocks with at least three composites within
one-half the distance of the variogram range; indicated resources are model
blocks with at least two composites within the distance of the variogram range.

The drill hole spacing at Florida Canyon Mine and Standard Mine Area
approximates a 100 foot grid. The variogram range varies between 40 feet and
170 feet. About 26% of the oxide resources at the mines are measured,
indicating the drill spacing is within of the variogram range, and 74% are
defined as indicated, indicating spacing more than of the variogram range, but
less than the full range. The variogram ranges at the Standard Mine Area are
between 30 feet and 210 feet and are generally slightly longer than the ranges
at the Florida Canyon Mine. At the Standard Mine Area approximately 54% of the
resources are defined as measured. Kriging variance was used to define measured
and indicated materials at the Standard Mine Area.

Florida Canyon Mine Reserves. The Florida Canyon Mine reserves include the
remaining material from several pits with prior mining and some new areas that
have not been mined. The pits for the new areas were designed using Whittle pit
optimization at $400/ounce gold price to complete the design, and cut off grades
based on $350/ounce gold price to determine reserves. Additional drilling was
conducted in 2002 and 2003 in some of the new pit areas. The areas with prior
mining include the Brown Derby, Central, Jasperoid Hill and Main Extension,
while new areas include Headwaters, Northeast Extension, and Radio Towers West.
The new areas are generally further up the slope of the Humboldt Range. Table 5
summarizes Florida Canyon Mine and Standard Mine Project reserves as of December
31, 2003, which conform to the definitions ascribed by the Canadian Institute of
Mining, Metallurgy and Petroleum and guidelines adopted by CIM Counsil on August
20, 2000 and the United States Securities Exchange Commission Industry Guide 7
definitions of Proven and Probable reserves.

TABLE 5 FLORIDA CANYON MINE RESERVES



Tons Grade Ounces Grade Ounces
Area 000's oz Au/t Au oz Ag/t Ag

Florida Canyon Mine
Proven & Probable Reserves 23,874.1 0.016 374.4 NA NA
SUBTOTAL FLORIDA CANYON MINE 23,874.1 0.016 374.4 NA NA

Standard Mine
Proven & Probable Reserves 22,501.7 0.018 404.1 0.16 3,618.9
SUBTOTAL STANDARD MINE 22,501.7 0.018 404.1 0.16 3,618.9

TOTAL PROVEN AND PROBABLE RESERVES 46,375.8 0.017 778.5 9.16 3,618.9


Note: Mine Development Associates located at 210 South Rock Blvd., Reno
Nevada 89052 is an independent mining engineering company, and completed its
review of our reserve estimates in February 2004.

Florida Canyon Mine and Standard Mine Area Mineralized Material. The
Florida Canyon Mine resources were modeled by our manager of exploration, with
supporting work and input from our engineering and geology staff. In addition to
a gold grade model, a geologic/mineralogic model was made to represent the


21

extent of each alteration/lithologic group recognized at the Florida Canyon
Mine.

Grade population domains were used to restrict high-grade assays from
smearing into lower grade domains. Domain boundaries that corresponded to each
of the four gold composite populations were drawn on 20 feet spaced bench maps;
these hard boundary polygons were used to code the drill composites and model
blocks to each particular domain and constrain the estimate. We used a
multi-pass technique to estimate block grades starting with measured resources
and ending with inferred material. Block grades were estimated by a combination
of ordinary kriging and inverse distance techniques.

All of our mine pits have been developed from optimized pits based only on
mineralized material. All of the pits are based on designed pit slopes with
ramps, with the exception of the Star pit at our Standard Mine area. Most of our
Standard Mine Area pits are side hill access, are not deep, and do not require
an in-pit ramp system.

Florida Canyon Mine Operations. The Florida Canyon Mine generally operates
two 10-hour shifts per day, six days per week. Generally, several pits are
mined at the same time. All equipment utilized at the Florida Canyon Mine is
leased or owned, and is in good working condition. Ore grade material is
transported to the run of mine heap or the crusher stockpile. The run of mine
material generally grades between 0.006 and 0.018 ounces of gold per short ton
(oz/ton), however, the actual cut off grade is dependent on rock and alteration
type. This material is dumped on the pad by 85-ton to 150-ton trucks, then
bulldozed prior to leaching. The higher-grade material is crushed to 80%
passing 0.75 inch and transported to the pad by a radial stacking conveyor.

Material is leached in three stages by drip systems, each applying 4,000
gallons per minute of leach solution to the heap. The first stage continues to
leach older ore. The second stage may leach younger ore or run-of-mine
materials. The third stage leaches the most recently crushed material on the
pad. In this fashion, the grade of the leach solution builds as it travels
through each stage. After the leach solution has traveled through all three
stages, the solution is stored in the pregnant solution pond.

The pregnant leach solution is processed by absorbing the gold in the leach
solution onto activated carbon. This is completed in one of the four carbon
absorption plants on the property, each with five leach tanks. After the carbon
has absorbed sufficient gold, the carbon is transported to the stripping,
regeneration, and refinery plant. The carbon is stripped and the concentrated
gold solution is pumped through electrowinning cells, where the gold is plated
onto cathodes and then refined into gold/silver dore bars. Most of the makeup
water used for leaching comes from a geothermal source located near the plant
site.

The operation uses a six- month recovery cycle to model gold recovery for
both run of mine and crushed materials. Table 6 shows the expected recovery for
gold over the six-month period.


22

TABLE 6 FLORIDA CANYON MINE HEAP LEACH RECOVERY MODEL



CUMULATIVE
CRUSHED CRUSHED ROM CUMULATIVE
MONTH RECOVERY RECOVERY RECOVERY ROM RECOVERY
- ----- ----------- --------- --------- -------------

1 13.4% 13.4% 4.1% 4.1%
2 22.1% 35.5% 19.3% 23.4%
3 21.2% 56.7% 18.6% 42.0%
4 13.1% 69.8% 11.4% 53.4%
5 4.6% 74.4% 4.1% 57.5%


Cutoff Grade Calculation. The internal cutoff grade calculation assumes
the material is already inside an optimum pit and must be mined. The decision
is where to send the material. If a profit can be made by processing the
material rather than sending it to the waste dump then the material should be
processed. The internal cutoff grade calculation removes the mining cost from
the cutoff calculation. A $350 ounce gold price is used for the cutoff grade
calculation. Set forth below are the cutoff grades used for the respective
mines.

For our Florida Canyon Mine two types of ore are processed. Higher grade
material is sent to the crusher and after crushing is placed on the heap. The
cutoff grade for this material ranges from 0.010 to 0.022 ounces of gold per
short ton depending on location and type of rock. Material that is below this
cutoff grade, but above a grade of 0.005 to 0.008 ounces of gold per short ton
is sent to the heap without crushing, and termed run-of-mine (ROM) material.

For our Standard Mine all material would be run of mine (ROM). The cutoff
grade for this material ranges from 0.005 to 0.006 ounces of gold per short ton.

MONTANA TUNNELS MINE

Our Montana Tunnels Mine, owned and operated by Montana, Inc., our
wholly-owned subsidiary, is an open pit gold mine located approximately five
miles west of Jefferson City, Montana, with gravity and flotation processing
facilities. Operations at the Montana Tunnels Mine commenced in 1987.

Location. The Montana Tunnels Mine is located about five miles west of
Jefferson City, Montana. We are currently operating a 16,000-ton per day
flotation plant (upgraded in 2003) and open pit mine at the deposit. The
Montana Tunnels Mine operation is located in the historic "Wickes-Corbin" mining
district. Our plan involves mining inside the current open pit to extract the
remaining reserves. We have also studied alternates for future expansion
including underground mining and rerouting a creek to allow the pit to expand to
the northwest.

Land Area. We own or lease an aggregate of 5,023.2 acres in fee and
patented lands at the Montana Tunnels Mine. The property consists of 136 wholly
or partially owned patented claims (2,345.14 acres), three patented leased
claims (45.19 acres) expiring on March 19, 2004, and 2,632.87 acres of owned fee
lands. All patented claims and fee lands have been surveyed. In addition, 213
unpatented claims are maintained (4,260 acres). We estimate that 90% of the
unpatented claims have been surveyed. A number of claims outside the contiguous
mining claims and fee land are isolated.


23

Production. Production during 2003 was lower for the reasons stated below.
Approximately 15% of its annual gold production in the form of dore, an
unrefined material consisting of approximately 90% gold, which is then further
refined. The remainder of the Montana Tunnels Mine's production is in the form
of zinc-gold concentrate and a lead-gold concentrate. The concentrates are
shipped to a smelter, and after smelting charges, we are paid for the metal
content. The Montana Tunnels Mine was idle for approximately four months in
2002, while we removed waste rock at the Mine under our Phase I stripping
program. Limited production resumed in October 2002, and full production on the
K-Pit resumed in April 2003. Since that time, the Montana Tunnels Mine has
experienced pit wall problems that have resulted in significant changes to the
mine plan, including an accelerated Phase II stripping schedule to remove 10
million tons of material that slid off the southwest pit wall. We anticipate
completing Phase II by mid-2004, which should provide a four-year mine life and
a return to the historical gold production levels. We have all permits in place
to complete this development.

The following table sets forth annual production levels for gold, silver,
lead and zinc at the Montana Tunnels Mine since 1999:

TABLE 7 MONTANA TUNNELS MINE PRODUCTION HISTORY



YEAR MILLION AU OZ AU AG OZ AG PB TONS PB ZN TONS
TONS OZ AU/T OZ AG/T 000'S % 000'S % ZN
- ------ ------- ------ ------- ------- ------- ----- ------- ----- -----

1999 5,076 0.0173 88.0 0.22 1,120.2 0.20 10.2 0.62 31.3
2000 5,384 0.0143 77.0 0.37 2,003.7 0.17 9.4 0.47 25.5
2001 5,424 0.0168 91.2 0.28 1,510.9 0.18 9.9 0.55 30.1
2002 2,881 0.0156 44.9 0.24 685.6 0.17 4.9 0.47 13.5
2003 4,663 0.0156 72.7 0.21 979.2 0.20 9.3 0.44 20.5
Totals 23,428 0.0159 373.8 0.27 6,299.6 0.19 43.7 0.51 120.9


Mining Claim Description. The Montana Tunnels Mine is located in Section 8
of Township 7 North, Range 4 West, while the permit boundary covers portions of
Section 4, 5, 8, 9, 15, 16, 17, and 20. Mining claims that cover the pit are
listed in Table 8. About half of Section 8 lands are our owned fee lands.

TABLE 8 CLAIMS COVERING MONTANA TUNNELS MINE




PATENTED CLAIMS MINERAL SURVEY UNPATENTED CLAIMS
- --------------------- -------------- -----------------

Geraldine C 9184 MF 1
P.Q.C. 9184 F 14
Montana 9184 F 15
General Harris 2038
Black Rock No. 2 9184
Black Rock No. 3 8940
D.E.D. 9184
Placer 258
Anna 8940


Agreements and Encumbrances. None of the Montana Tunnels Mine reserves are
subject to royalties, but we do have three leased claims that contain
mineralization which will be subject to a 4.5% net smelter return royalty if


24

they are mined. The annual holding costs of Montana Tunnels Mine lands,
exclusive of property taxes, total $47,150 as shown in Table 9.

TABLE 9 MONTANA, INC. LAND HOLDING COSTS




MONTH DUE LESSOR TYPE $AMOUNT
- ------------ --------------------------------------- --------------------- -------

January James Madison Easement $ 5,000
March MT Rail Link Lease Rental $ 5,000
Louis F. Hill/Fremont River Development Advance Royalty $10,300
August U.S. Bureau of Land Management Unpatented Claim Fees $21,300
September MT Department of Highways Lease Rental $ 250
October Fred L. Bell Water Use Agreement $ 300
November Virginia & Pamela Bompart Water Rights $ 5,000
Agreement
ANNUAL TOTAL $47,150


Mine equipment at the Montana Tunnels Mine is financed on an installment
note purchase basis with Caterpillar Financial Services, Inc. ("CAT Financial").
The total initial purchase price of mine equipment was $15,265,256. As of
February 29, 2004, the balance owed to CAT Financial was approximately $2.1
million.

At December 31, 2003, the net book value of the Montana Tunnels Mine,
determined in accordance with accounting principles generally accepted in the
United States ("US GAAP"), and its associated plant, equipment and capitalized
pre-stripping costs was approximately $17.8 million.

Environmental Liabilities. In 1998, the citizens of Montana passed
Initiative I-137, which banned cyanide leach mining of gold and silver. We
believe Initiative I-137 will have minimal, if any, impact on our mine located
in Montana. Although we use cyanide in our leaching processes, the cyanide is
not used in a manner prohibited by Initiative I-137. In addition, we have a
permit to utilize cyanide in our leaching process at our Diamond Hill Mine. As
of the date hereof, we are not aware of any other state or local regulation that
would have a material impact on our operations.

In March 2002, the Montana Department of Environmental Quality approved a
minor amendment to the operating permit for the Montana tunnels Mine that will
allow expansion of the present pit to mine about 20 million tons of ore in our
K-Pit, process and dispose of 20 million tons of tailings (waste materials
removed from a mining circuit after separation of the valuable minerals), and
mine and dispose of 30 million tons of waste rock. The permit allows raising the
tailings embankment by about 40 feet, and mining the K-Pit. The permit boundary
contains 2,116 acres with permitted disturbance totaling 1,176.4 acres. Our
current tailings dam is permitted to accommodate tailings from the 19.6 million
ton combined ore reserved from Pits K and L, which are currently scheduled to be
mined out in the second quarter of 2006. Further, if we receive approval from
the Montana Department of Environmental Quality of our expansion plans, we plan
to renew a phased lifting of our tailings dam to accommodate processing of an
additional 28.7 million ore tons which would result from such expansion plans.


25


The bonding requirements for the Montana Tunnels Mine were met by the
following bond instruments:



TYPE OF BONDING PENAL SUM AS AT YEAR END
- ----------------------------------------------------------- ---------------------------
2002 2003
------------- ------------

Partially secured surety bond issued by CNA pursuant to the
Term Bonding Agreement described immediately below: $ 14,987,688 $ 14,987,688
- ----------------------------------------------------------- ------------- ------------
Cash bond posted directly with the State of Montana: 0 128,697
- ----------------------------------------------------------- ------------- ------------
Real estate bond posted directly with State of Montana: 0 296,912
- ----------------------------------------------------------- ------------- ------------
TOTAL REQUIREMENT MET: $ 14,987,688 $ 15,413,297
- ----------------------------------------------------------- ------------- ------------


National Fire Insurance Company of Hartford, a unit of Continental Casualty
Company ("CNA"), provides $14,987,688 of the total reclamation bonding for the
Montana Tunnels Mine plan of operations at a deferred bond premium cost of $14
per $1,000 of bonding under a Term Bonding Agreement dated as of August 1, 2002.
Under that agreement: (i) CNA is committed to furnish $14,987,688 in bonding for
a 15-year term ending July 31, 2017; (ii) Montana, Inc. has agreed to deposit
$75,000 each month (to be adjusted periodically according to our sales price of
gold) into a collateral trust account established for CNA's benefit to secure
Montana Tunnel Mine's reimbursement obligations to CNA until the value of the
collateral trust account is equal to the outstanding penal sum of the CNA bond;
(iii) Apollo Gold Corporation and Apollo Gold, Inc., have guaranteed Montana,
Inc.'s obligations to CNA under the agreement; (iv) payment of premium is
deferred without interest until the value of the collateral trust account equals
the then-outstanding penal sum of the CNA bond; and (v) Montana, Inc. may
terminate the agreement at any time by obtaining a release of the CNA bond
either through posting a substitute bond with the State of Montana or otherwise,
at which time all property held in the collateral trust account will revert to
Montana, Inc.'s sole ownership. As of December 31, 2003, the collateral trust
account held $1,827,981. As an incidental benefit, the Term Bonding Agreement
also provides for an exploration surety bond with a penal sum of $53,186 to
secure reclamation of exploration disturbances outside the Montana Tunnels
Mine's permit boundary for the same 15-year term secured by the same collateral
trust account.

The $128,697 in cash bond posted directly with the State of Montana does
not require payment of any fees. However, interest accrues on cash balances at
a short-term rate established by the State of Montana from time to time.

The $296,912 in real estate bonding is established by a bonding instrument
recorded in the real estate records of Jefferson County, Montana. As of
December 31, 2003, real property having an appraised value of approximately
$422,500 was encumbered in order to meet the $296,912 bonding requirement.
There are no on-going fees associated with the posting of the real estate bond.
The real estate bond is in substance a mortgage, creating a security interest in
the encumbered properties, and does not interfere with ongoing beneficial use of
the encumbered properties by Montana, Inc., or its lessees.

Bonding requirements are subject to adjustment by the State of Montana for
various reasons from time to time. As noted above, the bonding requirement for
the Montana Tunnels Mine increased from $14,987,688 to $15,413,297 over the
course of 2003. As of March 21, 2004, the bonding requirement is scheduled to
increase to $15,888,955.


26

The Environmental Management Bureau of the Montana Department of
Environmental Quality is required to inspect the site twice each year for
compliance, with a written report required for each visit. The Montana
Department of Environmental Quality Air Quality Bureau is required to inspect
the site a minimum of once per year to review emissions. Other environmental
inspections completed by regulatory agencies over the past several years include
hazardous waste compliance, Water Quality Bureau permit inspections, Nuclear
Regulatory Commission inspection for nuclear gauges and the U.S. Bureau of
Alcohol, Tobacco, and Firearms inspections for mining explosives. No material
notices of violation or non-compliance have been received from any agency as the
result of a site inspection.

We have developed closure plans for the Montana Tunnels Mine and currently
estimate the present value of the cost of closure, as of December 31, 2003, to
total approximately $7.6 million, plus severance costs of approximately $1.5
million. We currently believe that cleanup of this site will commence during
2010.

Montana Tunnels Mine Geology. The Montana Tunnels Mine deposit is hosted in
the central part of the Montana Tunnels Mine diatreme, an upward-sloping passage
forced through sedimentary rock by volcanic activity. The Montana Tunnels Mine
diatreme is a heterolithic breccia, a conglomerate rock with sharp fragments,
that is matrix-rich, characterized by a sand-size fragmented matrix of quartz
latitic composition surrounding subangular to well-rounded fragments of
Cretaceous Elkhorn Mountains Volcanics, Tertiary Lowland Creek Volcanics, and
clasts derived from the Cretaceous Butte Quartz Monzonite pluton.

There are two main zones of mineralization in the Montana Tunnels Mine: a
central, pipe-like core of contiguous mineralization, and discontinuous zones of
mineralization peripheral to the core deposit, termed fringe mineralization.
The core of the deposit in plain view is oblong in shape and ranges from about
200 feet to 1000 feet in width, and from 1400 to 2000 feet in length, with a
vertical extent of at least 2000 feet. The core zone strikes approximately N30
E and dips steeply (60 degrees to 80 degrees) to the northwest.

Montana Tunnels Mine Drilling And Sampling. As of December 31, 2003, the
Montana Tunnels Mine database contains 891 reverse circulation, rotary, core and
blasthole drill holes, totaling 466,609 feet, that were drilled from the mid
1970s to the present by numerous mining and exploration companies. There are
48,279 drill sample intervals in the Montana Tunnels Mine database, each with
gold, silver, lead, zinc, and calculated gold-equivalent values. The Montana
Tunnels Mine drill hole database is summarized in Table 10:

TABLE 10 MONTANA TUNNELS MINE DRILL HOLE DATABASE SUMMARY



DRILL TYPE NUMBER OF HOLES FOOTAGE
- ------------------- --------------- -------

CORE 95 63,184
REVERSE CIRCULATION 644 351,333
ROTARY 140 51,372
BLASTHOLE 12 720
- ------------------- --------------- -------
TOTAL 891 466,609


Gold is analyzed by fire assay methods with a duplicate assay for each
sample. Silver, lead, and zinc are analyzed by atomic absorption spectroscopy
with a duplicate analysis once every 24 samples and are standard analyzed once
every 12 samples. The majority of drill samples are analyzed at our onsite
laboratory. Comparison of gold fire assay check samples indicate high sample


27

variance, though the average grade of the check sample datasets, as a whole,
agreed closely. There is good correlation between silver, lead, and zinc
duplicate samples.

The Montana Tunnels Mine was idle for approximately four months in 2002,
while we made preparations to begin the removal of waste rock at the mine.
Limited production resumed in October 2002, and full production on the K-Pit
resumed in April 2003. Since that time, the Montana Tunnels Mine has
experienced pit wall problems that have resulted in significant changes to the
mine plan, including an accelerated stripping schedule to remove 10 million tons
of material that slid off the southwest pit wall. The K-Pit should be completed
during the second quarter of 2004. In October 2003, a second waste stripping
project ("Phase II") known as the L-Pit project was initiated, and we intend to
pre-strip approximately 17 million tons of waste from the south and west high
walls of the open pit after which the L-Pit will supply about three years of
ore. The final designed expansion at this time is the M-Pit, based on a $350/oz
gold price optimized pit.

Montana Tunnels Mine Drill Hole Spacing. The Montana Tunnels Mine drill
hole spacing is generally within the gold variogram range of 30 feet to 140 feet
in the core. The core diatreme contains about 80% of the Montana Tunnels Mine
Measured and Indicated Resources. The drill hole spacing in the fringe is
generally wider than the variogram range of 50 feet to 170 feet. Measured
mineralization is defined by those model blocks within one-half the variogram
range from the nearest composite. About 57% of the model blocks above the 0.016
ounces AU EQ/T cutoff grade have the closest composite within one half of the
variogram range. Indicated resources are model blocks with the closest
composite within the average variogram range, which are about 43% of the model
blocks above the 0.016 ounces AU EQ/T cutoff grade. Montana, Inc. considers
material beyond the variogram range and within three times the variogram range
to be inferred. We use an estimate of three times the variogram range because
the core of the diatreme is generally known to almost always be mineralized.

Montana Tunnels Mine Reserves. The reserves reported for the Montana
Tunnels Mine deposit conform to the definitions ascribed by the Canadian
Institute of Mining, Metallurgy and Petroleum and guidelines adopted by CIM
Council on August 20,2000 and the United States Securities Exchange Commission
Industry Guide 7 definitions of Proven and Probable Reserves. The Montana
Tunnels Mine reserves as of December 31, 2003 are made up of three pit
expansions. The first expansion is the material remaining in the current pit
expansion ("K22A"), which is scheduled to be mined out during the second quarter
of 2004.

The second pit expansion of the Montana Tunnels Mine reserves is the L8B
pit expansion, resulting from a redesign of the current pit ramp system and
steeper pit slopes below the 5,000 feet elevation. The initial waste stripping
from this expansion is nearly completed and is scheduled to supply all of the
mill feed material for the next three years, until the M2 Pit can supply the
remaining ore.

The third and potentially final pit phase is the M2 Pit. Mining permits
have not been received for the M2 expansion; however, we have been in
discussions regarding the expansion over the past two years and expect to apply
for the necessary permits during the second quarter of 2004. A portion of the
material contained in the low-grade stockpile is included in the reserve
tabulation. Montana Tunnels Mine reserves as of December 31, 2003 are
summarized in Table 11. The reserves were calculated using metal prices of
$350/ounce gold, $5.50/ounce silver, $0.45/lb zinc, and $0.30/lb lead.


28



TABLE 11 MONTANA TUNNELS MINE RESERVES (1)

RESERVES CONTAINED MATERIALS

PIT TONS GOLD SILVER TONS TONS
PHASE CLASSIFICATION 000'S OZ AU/T OZ AG/T % PB % ZN OZ 000'S OZ 000'S PB ZN
- -------------- ----------------- -------- ------- ------- ----- ----- -------- -------- ------ -------

K22A Proven 1,685.8 0.013 0.170 0.187 0.578 21.5 287.3 3,155 9,748
L8C Proven 15,691.1 0.016 0.189 0.206 0.554 244.9 2,969.2 32,264 86,988
M2 Proven*
Mill Stockpile Proven 138.0 0.011 0.150 0.200 0.480 1.5 20.7 276 662
- -------------- ----------------- -------- ------- ------- ----- ----- -------- -------- ------ -------

TOTAL PROVEN 17,514.8 0.015 0.187 0.204 0.556 267.9 3,277.1 35,695 97,399
- -------------- ----------------- -------- ------- ------- ----- ----- -------- -------- ------ -------

K22A Probable 24.1 0.018 0.178 0.208 0.642 0.4 4.3 50 155
L8C Probable 1,413.9 0.015 0.259 0.172 0.439 21.3 365.7 2,436 6,206
M2 Probable* 15,893.7 0.017 0.237 0.171 0.585 263.8 3,766.3 27,112 93,049
M2 Probable 8,319.8 0.017 0.228 0.168 0.611 139.1 1,897.5 13,936 50,834
- -------------- ----------------- -------- ------- ------- ----- ----- -------- -------- ------ -------

TOTAL PROBABLE 25,651.4 0.017 0.235 0.170 0.586 424.6 6,033.7 43,534 150,244
- -------------- ----------------- -------- ------- ------- ----- ----- -------- -------- ------ -------

TOTALS PROVEN & PROBABLE 43,166.2 0.016 0.216 0.184 0.574 692.5 9,310.9 79,228 247,643
- -------------- ----------------- -------- ------- ------- ----- ----- -------- -------- ------ -------

* note meets proven classificaion criteria, however lowered to probable classification since all permits have
not yet been received



Note: 1. Mine Development Associates, located at 210 South Rock Blvd., Reno
Nevada 89052, is an independent mining engineering company, and completed its
review of our reserve estimates in February 2004.

Montana Tunnels Mine Recovery Factors. The reserves stated for the Montana
Tunnels Mine are an estimate of what can be economically and legally recovered
from the mine, and as such, incorporate losses for dilution and mining recovery.
Reconciliation with actual production indicates the reserve estimates have been
accurately predicting the material mined. Some of the recovery factors for the
Montana Tunnels Mine are the following:




Ending
Item Units Value
-------- ------

Gold Price $/oz Au $ 350
Silver Price $/oz Ag $ 5.50
Lead Price $/lb Pb $ 0.30
Zinc Price $/lb Zn $ 0.45
Recovery-Au 82.5%
Recovery-Ag 74.8%
Recovery-Pb 87.0%
Recovery-Zn 85.2%


Montana Tunnels Mine Operations. Open pit mining at Montana Tunnels Mine
is conducted with an equipment fleet either leased, owned or being purchased
under installment notes. The equipment is in good working condition. The
Montana Tunnels Mine operates two 12-hour shifts, seven days per week.
Currently, mine production averages approximately 60,000 tons per day of ore and
waste, of which 15,000 tons per day of ore is shipped to the crusher stockpile
where it is loaded into the crusher hopper for size reduction before entering
the plant. The plant uses a conventional flotation process to produce lead and
zinc concentrates. Gold and silver are also recovered using a gravity circuit
and refined at the plant to produce a dore. Flotation is a process used to
concentrate the grade of the sulfide ore material to allow the economic shipment


29

of higher grade material to a smelter. The flotation process uses chemicals
that are added to the crushed and milled ore and waste slurry. The concentrate
that is created rises to the surface and overflows while the waste material
sinks to the bottom of a tank. The concentrate is collected and dried and then
shipped to a smelter. The waste material is collected and becomes the tailing
material usually deposited in the tailing impoundment at the mine site. Gravity
concentration is a process used to separate materials that have significantly
different densities. Gravity separation is especially useful with gold ore
recovery since it is a very dense material. Several types of equipment and
systems are used to separate material with different densities. In 2003, we
upgraded the flotation mill by the installation of a new primary crusher and a
modification to the grinding circuit. The objective of these upgrades is to
increase our total ore throughput at the Montana Tunnels Mine from 425,000 tons
to 475,000 tons per month.

Table 12 shows the plant recovery through December 31, 2003:

TABLE 12 PLANT RECOVERY - INCEPTION THROUGH YEAR END 2003



AVERAGE
METAL 1995 1996 1997 1998 1999 2000 2001 2002 2003 RECOVERY
- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ---------

AU 84.9% 84.0% 85.9% 84.1% 81.8% 77.4% 82.6% 81.0% 80.9% 82.5%
AG 75.6% 76.4% 80.7% 77.4% 76.0% 67.6% 73.2% 70.8% 75.8% 74.8%
PB 87.6% 89.7% 91.1% 90.1% 89.6% 79.8% 84.1% 85.1% 86.0% 87.0%
ZN 85.3% 85.7% 90.2% 89.7% 82.4% 78.5% 85.7% 86.0% 83.4% 85.2%
- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ---------


Table 13 shows the distribution and grades of metals in the concentrates
and tailings for 2002 and 2003 at the Montana Tunnels Mine:

TABLE 13 MONTANA TUNNELS MINE PLANT PRODUCTION SUMMARY



GOLD SILVER LEAD ZINC TONS GRADE GRADE GRADE GRADE
DISTRIBUTION DISTRIBUTION DISTRIBUTION DISTRIBUTION PRODUCT OZ AU/ OZ AG/ % PB % ZN
% % % % TON TON
------------- ------------- ------------- ------------- --------- -------- -------- ----- -----

2002
Gravity 10.9 0.2 363,761* 21,159.8 9,998.3
Lead Concentrate 54.1 45.3 70.2 5.0 13,777 3.057 66.50 48.7 9.46
Zinc Concentrate 12.4 22.1 9.6 73.5 36,550 0.0264 12.21 2.49 52.07
Tailings 22.6 32.4 20.2 21.5 5,333,683 0.0032 0.120 0.035 0.102

2003
Gravity 11.84 0.5 421,513* 18,740.5 10,261.0
Lead Concentrate 59.43 52.34 79.05 8.52 15,736 2.773 31.63 45.56 11.18
Zinc Concentrate 9.61 22.72 6.91 74.92 29,974 0.2357 7.18 2.09 51.58
Tailings 19.12 24.24 14.04 16.56 4,649,238 0.003 0.05 0.03 0.07


* grams of gravity concentrate

Gold and silver dore is shipped to Johnson Matthey in Salt Lake City, Utah
for further refining, and our lead and zinc concentrates are shipped to Teck
Cominco Metals Ltd. in British Columbia, Canada. The smelters that we use are
in reasonable proximity to our mines; however, if we had to change smelters we
could incur substantial additional transportation costs.

Montana Tunnels Mine Cutoff Grade Calculation. Three products are made
from the ore mined from our Montana Tunnels Mine: dore containing gold and
silver recovered from a gravity circuit, a lead concentrate and a zinc
concentrate. The concentrates are shipped to a smelter in Canada for smelting
and refining. There is a transportation charge for shipping the concentrate to
the smelter. The smelter charges a treatment charge per ton of concentrate for


30

smelting, and a refining charge per unit of metal. In addition, the smelter
does not recover all the metal in the concentrate and pays only for a portion of
the contained metals. The metal prices, recovery, concentrate ratio and offsite
costs are used to calculate ratios for each payable metal compared to an ounce
of gold. For the Montana Tunnels Mine we use a historic formula to calculate
equivalent gold values: Au Eq = Au + Ag/96.105 + Pb/194.707 + Zn/63.230.

DEVELOPMENT AND EXPLORATION PROPERTIES

We conduct exploration activities. Our exploration projects located in
Canada are owned and operated by Apollo Gold Corporation, while our exploration
projects located in the United States are generally owned and operated by Apollo
Gold Exploration, Inc. We own or control patented and unpatented mining claims,
fee land, and state and private leases in the United States and Canada. Our
strategy regarding reserve replacement is to concentrate our efforts on: (1)
existing operations where an infrastructure already exists; (2) other properties
presently being developed; and (3) advanced-stage exploration properties that
have been identified as having potential for additional discoveries. We are
currently concentrating our activities at our Black Fox Mining Project (near the
site of the former Glimmer Mine), the Pirate Gold Prospect and the Standard Mine
Area. For the year ended December 31, 2003, we spent $1.61 million and $3.94
million on the exploration and development of the Standard Mine and Black Fox
Project, respectively (both amounts of which have been capitalized for
accounting purposes and we expensed $2.12 million); therefore, we have spent
approximately $7.67 million on total exploration and development expenditures
for the year ended December 31, 2003. Exploration expenditures for the years
ended December 31, 2003, 2002 and 2001 were approximately $2,117,000, $451,000,
and $94,000, respectively. The following discussion regarding our exploration
activities contain estimates, attributes and other information regarding our
properties; however, no assurance can be given that the estimate of the amount
of metal or the indicated level of recovery of these metals or other attributes
of the properties will be realized.

BLACK FOX PROPERTY

On September 9, 2002, we completed the acquisition of certain real estate
and related assets of the Glimmer Mine from Exall Resources Limited ("Exall"),
and Glimmer Resources Inc. ("Glimmer") (now known as our Black Fox Exploration
Project or Black Fox). The Glimmer Mine was a former gold producer that ceased
operations in May 2001 due to the low price of gold. We paid to Exall and
Glimmer an aggregate purchase price consisting of $2 million in cash and an
aggregate of 2,080,000 of our common shares. Pursuant to the terms of the
acquisition, an additional $2,300,000 is payable to Exall and Glimmer at the
time the Glimmer Mine reaches commercial production (defined to mean a minimum
of 30 consecutive days of production with an average of 300 tonnes, or more, of
output from the Glimmer Mine).

Location. The Black Fox development project is located in the Kirkland Lake
Mining District, approximately five miles east of Matheson and 40 miles east of
Timmins, Ontario. Lake Abitibi is six miles northwest of the project site. The
property encompasses over 1,200 acres within the Hislop and Beatty Townships.
The majority of the property is private fee land.

Geology. The Black Fox development project sits astride the
Destor-Porcupine (DF) 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 DF Fault where the strike changes from east-west to
southeast. Folded and altered basalts are the host rocks for mineralization.


31

Gold occurs as free gold in quartz veining and stockworks and in gold associated
with pyrite.

Targets. We purchased Black Fox as an advanced exploration project. We
believe the potential for the property lies in new ore zones at depth and along
strike of the Destor-Porcupine Trend. We are testing the potential of this
property in several stages.

We currently anticipate that the development and commercialization of our
Black Fox Property will require three phases. In September 2002, we completed
the acquisition of certain assets known as our Black Fox Property from two
unrelated third parties, Exall Resources Limited and Glimmer Resources, Inc. The
Black Fox Property is located east of Timmins, Ontario. The first phase
commenced in early 2003, and involved shallow drilling to test the open pit
potential and deep drilling of core holes from 200 to 500 meters in depth. By
the end of 2003, a total of 297 surface core holes had been completed for a
total of 271,000 feet in these programs. Surface exploration was also started on
the Black Fox Property, and the land package was increased from 805 acres to
approximately 1,500 acres by the end of 2003.

We have begun the second phase of our Black Fox project. The second phase
will provide for the development of underground access for further exploratory
drilling. We plan to develop an underground ramp from existing structures. We
currently anticipate commencing the second phase of underground drilling in
2004. We also plan to begin the permitting process for the third phase of the
Black Fox project, and anticipate that this process will require approximately
two years, based on a plan for combined open pit and underground mine, with
on-site milling, at a capacity of 1500 metric tons of ore per day. The third
phase will include the construction of the mine and processing facilities, at an
aggregate estimated cost of approximately $45.0 million.

We met the bonding requirements established by the Province of Ontario for
the Black Fox Project through the following bonding instruments:



TYPE OF BONDING PENAL SUM AS AT YEAR END
- ----------------------------------------------------- ----------------------------
2002 2003
------------ --------------

Letter of Credit issued by TD Canada Trust secured by
pledged deposit account: Cdn $159,200 Cdn $489,200
- ----------------------------------------------------- ------------ --------------
TOTAL BONDING REQUIREMENT MET: Cdn $159,200 Cdn $489,200
- ----------------------------------------------------- ------------ --------------


Our obligations to reimburse TD Canada Trust for any drawing under the
letter of credit is secured by our maintenance of an amount equal to the amount
available for drawing in a deposit account pledged to TD Canada Trust. We pay
an annual letter of credit fee equal to 1% of the amount available for drawing.
We earn interest on the deposit account at a rate established by TD Canada Trust
from time to time.

Black Fox Mine Drilling and Sampling. As of December 31, 2003, we had
completed a total of 297 surface diamond drill holes totaling over 82,000


32

meters. Our drilling supplemented the 284 surface drill holes and 740
underground drill holes drilled by prior owners. Table 14 below summarizes the
drill hole database.

TABLE 14 BLACK FOX PROJECT DRILL HOLE DATABASE



COMPANY PERIOD LOCATION NUMBER METERS
- ------- --------- ----------- ------ -------

Noranda 1989-1994 Surface 142 27,930
Exall 1995-1999 Surface 142 21,295
Exall 1996-2001 Underground 720 62,827
Apollo 2002-2003 Surface 296 82,895

Totals 1,300 194,947


Black Fox Reserves. The Black Fox Project reserves were developed by
completing a pre-feasibility study of developing an open pit mine on the Black
Fox property. This study did not consider underground mining as an option; this
will be addressed in the final feasibility study.

Pit optimization studies were completed using the following parameters for
the deposit.

- Overburden mining cost - $US 1.00 per tonne of material;
- Rock mining cost - $US 1.25 per tonne of material;
- Processing cost - $US 9.00 per tonne ore;
- General and Administrative cost - $US 3.50 per tonne ore;
- Plant gold recovery - 96%;
- Assume 50% of existing underground workings backfilled with material
having a density of 2.0;
- Pit Slopes - 480 overall in rock with ramp; 19 degree overburden.

The pit slopes were based on recommendations by Golder Associates for the
rock portion of the pit. The overburden can be as thick as 40 meters in the area
of the pit. Geotechnical testing has not been completed for the overburden
materials, however a preliminary drilling program to gather samples has been
completed. We believe the current estimate of a 3:1 slope (19 degree) in the
alluvium is a reasonable assumption at this point of the study, however the
recommended overburden pit slopes may be different after the geotechnical
testing has been completed. In addition, the geotechnical parameters developed
for the overburden could also impact the waste dump height, (currently 50
meters), overburden dump slope and height (currently 30 meters), and the
tailings area storage capacity per square meter. Table 15 summarizes the results
of pit optimization studies, which illustrates that the size of the ultimate pit
does not change much between $300 and $375/oz gold prices, but does increase
significantly at $400.


33

TABLE 15 BLACK FOX PROJECT PIT OPTIMIZATION



Mineralized Zones
Gold ------------------------------------------ Backfilled Alluvium Total Waste Total
Price Cutoff Grade Tonnes Grade Ounces UG Workings Tonnes Tonnes Strip Pit
US/oz g Au/t (000') g Au/t Au (000's) tonnes (000's)* (000's) (000's) Ratio tonnes
- ------ ------------ -------- ------ ---------- --------------- --------- ------------ ----- --------


400 1.00 3,576.8 4.22 485.5 348.6 9,908.3 51,035.2 14.3 54,612.0
400 1.10 3,326.9 4.46 477.0 348.6 9,908.3 51,285.1 15.4 54,612.0
400 1.27 2,971.5 4.85 463.5 348.6 9,908.3 51,640.5 17.4 54,612.0
- ------ ------------ -------- ------ ---------- --------------- --------- ------------ ----- --------
375 1.00 2,901.0 4.38 408.5 256.4 7,409.6 35,030.9 12.1 37,931.9
375 1.10 2,713.0 4.61 402.2 256.4 7,409.6 35,218.9 13.0 37,931.9
375 1.27 2,442.6 4.99 391.9 256.4 7,409.6 35,489.4 14.5 37,931.9
- ------ ------------ -------- ------ ---------- --------------- --------- ------------ ----- --------
350 1.00 2,843.3 4.42 404.3 249.9 7,314.8 34,485.0 12.1 37,328.3
350 1.10 2,660.1 4.66 398.1 249.9 7,314.8 34,668.2 13.0 37,328.3
350 1.27 2,397.8 5.03 388.2 249.9 7,314.8 34,930.4 14.6 37,328.3
- ------ ------------ -------- ------ ---------- --------------- --------- ------------ ----- --------
300 1.00 2,632.8 4.57 386.6 232.9 6,669.1 31,409.9 11.9 34,042.7
300 1.10 2,467.0 4.80 381.0 232.9 6,669.1 31,575.7 12.8 34,042.7
300 1.27 2,231.4 5.19 372.0 232.9 6,669.1 31,811.4 14.3 34,042.7
- ------ ------------ -------- ------ ---------- --------------- --------- ------------ ----- --------
250 1.00 1,044.2 6.01 201.7 31.4 3,053.7 9,753.0 9.3 10,797.2
250 1.10 996.2 6.25 200.1 31.4 3,053.7 9,801.0 9.8 10,797.2
250 1.27 925.3 6.63 197.4 31.4 3,053.7 9,872.0 10.7 10,797.2
- ------ ------------ -------- ------ ---------- --------------- --------- ------------ ----- --------
200 1.00 821.8 6.55 173.0 8.2 2,320.2 6,971.3 8.5 7,793.1
200 1.10 786.6 6.79 171.8 8.2 2,320.2 7,006.5 8.9 7,793.1
200 1.27 734.5 7.19 169.8 8.2 2,320.2 7,058.6 9.6 7,793.1
- ------ ------------ -------- ------ ---------- --------------- --------- ------------ ----- --------
150 1.00 531.2 7.39 126.2 2.3 1,559.3 3,761.4 7.1 4,292.6
150 1.10 512.2 7.62 125.5 2.3 1,559.3 3,780.4 7.4 4,292.6
150 1.27 485.2 7.98 124.5 2.3 1,559.3 3,807.4 7.8 4,292.6
- ------ ------------ -------- ------ ---------- --------------- --------- ------------ ----- --------

* UG tones assumes backfilled @ 2.0 specific gravity
The results are shown at similar cutoff grades for comparative purposes only - At a $US 350/oz gold price a
1.27 g Au/t cutoff is used


Following the pit optimization, a final pit and an initial pit were
designed using the optimized pit shapes of the $400 and $200 optimized pits
respectively as a templates for design. Table 16 illustrates the proven and
probable reserves of the Black Fox Project available by open pit mining using
the designed pits and a $350/oz gold price to establish the internal cutoff
grade of 1.27 g Au/t.

TABLE 16 BLACK FOX PROJECT PROVEN AND PROBABLE RESERVES






TONNES GRADE OUNCES AU TONNES STRIP
CLASSIFICATION 000'S G AU/T 000'S WASTE (000'S) RATIO
- -------------- ------- ------ --------- ------------- -----


Proven 2,193.6 4.84 341.6
Probable 759.7 4.73 115.5
- -------------- ------- ------ ---------

TOTALS 2,953.3 4.81 457.1 55,098.0 18.66
- -------------- ------- ------ --------- ------------- -----

Waste includes 11.05 million tones of Overburden


PIRATE GOLD PROSPECT

The Pirate Gold Prospect is owned by Apollo Gold Exploration, Inc., and is
one of our mineral exploration properties located in Nevada approximately 30
miles south of the Florida Canyon Mine. The Pirate Gold Prospect is located on
the northern end of the Eugene Mountain range and the Mill City Mining District,
Humboldt County, Nevada. It consists of 43 mining


34

claims staked on U.S. Bureau of Land Management land. Both Pirate Gold Prospect
and Florida Canyon Mine share a similar geologic setting. While no
determination has been made, we believe that the Pirate Gold prospect may have
the potential to contain many positive attributes. It shares many similar
attributes with our Florida Canyon Mine, with the most prominent being amounts
of visible gold. Intersecting faults and dikes have allowed the formation of
very high-grade ore shoots.

Pursuant to an assignment agreement made as of March 1, 2002 between Pirate
Gold LLC, Winnemucca, Nevada ("Pirate Gold") and Nevoro, Nevoro was assigned all
of Pirate Gold's right, title and interest in a mining lease (the "Mining
Lease"), effective June 22, 2001, between Pronto Prospects LLC, Winnemucca,
Nevada, as lessor and Pirate Gold as lessee. The Mining Lease has an initial
term of 15 years, subject to renewal on a year-to-year basis so long as the
lessee is engaged in commercial production. Commercial production is defined to
mean that amount of production which, during the calendar year in which the
initial term expires and each calendar year thereafter, results in payment to
the lessor of production royalties at least equal to the advance minimum
royalties payable in the year in question. We are required to pay advance
minimum royalty payments of $10,000 on or before the Mining Lease's anniversary
date in years 2 and 3, increasing to minimum advance royalty payments of $15,000
in years 4 through 15. Such minimum royalty payments are to be made in lieu of
net smelter return royalties to guarantee minimum payment until commercial
production commences. We are required to pay a net smelter return royalty based
on the price of gold, from a low of 2.5% if the price of gold is less than or
equal to $299 per ounce, increasing in increments of 0.5% for each $25 increase
in the price of gold, up to a maximum net smelter return royalty of 5%
(applicable when the price of gold exceeds $400 per ounce). In addition, we
will be required to spend a minimum of $50,000 on exploration expenses in year
1; increasing to a minimum of $100,000 in years 2 through 4 and a minimum of
$250,000 in years 5 through 15. Any expenditures of work in excess of the
amount in any calendar year will be credited against the amount required to be
performed in any subsequent year or years. Either party, without the consent of
the other party, may assign the Mining Lease. In the event that we are in
default in the performance of our obligations under the Mining Lease, the lessor
has the option of forfeiting the Mining Lease, subject to our right to make
corrective measures within 30 calendar days from the date we receive written
notice.

Location. The Pirate Gold Prospect is located on the northern end of the
Eugene Mountain range and the Mill City Mining District, Humboldt Co., Nevada.
It is located in T35N, R34E, Section 2l and T35N, R35E, Section 18. The
prospect consists of 43 mining claims staked on U.S. Bureau of Land Management
land.

Geology. The claim block is made up of inerbedded phyllite, limestone and
sandstone of the Triassic to Jurassic age Auld Lang Syne group. Bedding
generally strikes northeast, with dips being variable. Quaternary alluvium
covers most of the flat areas and the valley. High angle northeast and
northwest trending faults transect the project area. In the southern part of
the Eugene Mountains, near the Stank Mine, the Stank Fault occurs. It strikes
northwest and is reported to dip at approximately 45 degrees to the southwest in
underground exposures. It has been interpreted as being a thrust fault.

Cretaceous age granodiorite intrudes the area. Stocks are visible in the
southern portions of the Eugene Mountains, while further north in the project
area dacite dikes are common. Diorite dikes of an unknown age are also present.
Both types of dikes intruded along active faults, which have seen post intrusion
movement. Silicification in the sediments adjacent to the dikes helped to heal
the fault zone and make the sediments quite brittle. During subsequent fault
movement, the silicification allowed the faults to stay open and form pathways


35

for fluid migration. It appears that ore shoots occurred where northeast or
northwest trending fault zones intersected the dikes.

Gold occurs in veins that range in width from one to 20 feet. The gangue,
or base rock in which the gold is found, is quartz and calcite, with multiple
stages of mineralization being visible.

This property has seen production in the past. Four tunnels access several
small ore shoots. A small amount of development waste rock is all that exists
in the dump of the lower adit. It appears that nearly all of the material mined
in the upper three adits was direct shipping ore, as virtually no waste dump
material exists. The upper adits access a stope which daylights to the surface.
This stope is estimated to have an average width of 15 feet and to be 50 feet in
both height and length. This would indicate that approximately 2,700 tons of
high-grade material was removed. Abundant visible gold can still be panned from
ore material remaining on the stope wall. It is estimated that this material
would grade multiple ounces of gold per ton. There are a series of other
similar stopes that have been mined but are not currently accessible. Recently,
a second high-grade vein was exposed in a bulldozer cut, located approximately
500 feet east of the adits. This second vein indicates the likelihood of a
series of subparallel mineralized veins in this area. Substantial specimens of
free gold (gold nuggets found on the ground) from this site have been recovered
by predecessor owners. Visible gold was also present in the upper portions of
some of the larger mines near this property.

Targets. We believe that the high-grade veins seen on the surface may be
an indication of a much larger system at depth. The rocks exposed on the
surface are phyllites. The phyllites could form bulk tonnage gold deposits if
they were first silicified and then shattered. A low-angle intrusive would make
an effective cap to the mineralizing fluids. Over-pressuring of the system and
subsequent breakage of the cap would cause wide spread silicification and gold
mineralization of the phyllites. Repeated brecciation, boiling and rehealing of
the cap would form a large high-grade deposit. The high-grade veins at the
surface would only be indications of the feeding structures at depth.

An additional target would be where the faults that host the high-grade
veins intersect other favorable rock types at depth. Massive sandy limestone
units can be seen in the southern parts of the Eugene Mountains. These would be
good host rocks for a replacement style ore body, if they can be traced to the
project area. The strike and dip of these units indicate that they could be
present at depth. As was noted previously, large, low angle thrust faults have
been documented to occur in the southern part of the Eugene Mountains. These
low-angle shears could very well be present below the surface in the project
area. These faults were apparently open during the emplacement of the
granodiorite dikes and could also have been intruded. Low-angle, sill-like,
intrusions, have formed conduits and caps to mineralizing fluid migration in
many of the larger gold districts in Nevada. Their presence would be a positive
attribute to the property.

We believe that the Pirate Gold Prospect either contains or has the
potential to contain many favorable attributes. The presence of an abundance of
visible gold may be indicative of a very active mineralized system at depth.
The exposed phyllite host rocks are conducive to the formation of bonanza-type
vein deposits. The proper traps and host rocks for large tonnage deposits also
occur nearby. They could be projected to intersections with the high-grade
feeder structures visible on the surface and possibly form large deposits at
depth.

An estimate of the ultimate values of these deposits can, at present, only
be derived by considering known deposits in the area, such as the Sleeper Mine.
There can be no assurance, however, that we will be able to locate or extract


36

any material quantity of gold or other metals at the Pirate Gold Prospect, or
that any mining activities at that site would be profitable. In 2003, we
conducted 9,363 feet of reverse circulation drilling on the Pirate Gold
Prospect, and we currently anticipate another 10,000 feet of exploration
drilling in 2004.

Substantial expenditures are required to establish ore reserves through
drilling, to determine metallurgical processes to extract the metals from the
ore and, in the case of new properties, to construct mining and processing
facilities. At December 31, 2003, we did not have any ore reserves for the
Pirate Gold Prospect.

The bonding requirements established by BLM for the Pirate Gold Project
were met by Apollo Gold Exploration, Inc., through the following bond
instruments:



TYPE OF BONDING PENAL SUM AS AT YEAR END
- --------------------------------------------------------- ---------------------------
2002 2003
- --------------------------------------------------------- ---------- ---------------

Personal bond secured by pledge of certificate of deposit
account maintained with US Bank: $ 2,500 $ 2,500
- --------------------------------------------------------- ---------- ---------------
Personal bond secured by irrevocable stand-by letter of
credit issued by Washington Mutual Bank: 0 1,777
- --------------------------------------------------------- ---------- ---------------
TOTAL BONDING REQUIREMENT MET: $ 2,500 $ 4,277
- --------------------------------------------------------- ---------- ---------------


We do not incur any fees in connection with the $2,500 US Bank pledged
certificate of deposit account. We earn interest on the account at a rate
established by US Bank from time to time. Our obligations to reimburse
Washington Mutual Bank for any drawing under the letter of credit is secured by
our maintenance of an amount equal to the amount available for drawing in a
deposit account pledged to Washington Mutual Bank. We pay an annual letter of
credit fee equal to 2% of the amount available for drawing. We earn interest on
the deposit account at a rate established by Washington Mutual Bank from time to
time.

NUGGET FIELD PROSPECT

The Nugget Field Prospect is owned and operated by Apollo Gold Exploration,
Inc. While no determination has been made, we believe that the Nugget Field
Prospect could have the potential to contain many positive attributes.

Location. Nugget Field is located approximately 30 miles southwest of the
Pirate Gold Prospect, on the east side of the Majuba Mountains, within the
Antelope mining district. Thirty-two lode mining claims have been located in
T32N, R32E, Section 18.

Geology. The rocks surrounding the Nugget Field are principally Triassic
age slates and phyllites. Faults trending northeast and northwest have been
documented to offset the sediments. Pre-tertiary age dacite and diorite dikes
and sills have intruded the area. The project area is mostly covered by
quaternary alluvium. The alluvium has been the host for abundant placer gold.
The gold that has been historically recovered often still shows crystals and
other delicate textures. It is apparent that the gold has traveled very little,
if at all. The claim block lies on a paleo-shoreline of ancient Lake Lahontan,
which was once a large body of water but is now nearly dried up. The gold was
probably weathered from portions of the underlying rocks and deposited nearby.
Large, massive, northeast trending quartz veins protrude through the alluvium
and may be related to the gold. There is no way of estimating the total amount
of placer gold taken from this area, due to its having been prospected on and
off for the last 70 years.


37

Targets. The source of the placer gold has never been found. The delicate
nature of the gold indicates that it has not traveled far. We believe that the
source is probably beneath the alluvium. The massive quartz veins may be
related to nearby quartz, calcite and gold veins. These veins would have eroded
faster than the bull quartz due to the carbonate content. The source of the
placer gold could be found by projecting the intersections of the northeast and
northwest trending faults with the dikes and sills that can be seen in the
surrounding hillsides. Various types of electromagnetic geophysical methods
could be used to further refine the potential targets.

A second target would be the projection of the high-grade structural
intersections deeper to more favorable host rocks. The phyllites tend to
produce tighter more restricted ore bodies. The Triassic sediment package in
this area generally contains a large amount of sandy limestone that can host
large tonnage gold deposits. Higher grade, structurally controlled deposits are
also possible.

An estimate of the ultimate values of these deposits can, at present, only
be derived by considering known deposits in the area. There can be no
assurance, however, that we will be able to locate or extract any material
quantity of gold or other metals at the Nugget Field Prospect, or that any
mining activities at that site will be profitable. As of December 31, 2003, we
had not completed any exploratory drilling on the Nugget Field Prospect. A
decision when and if we drill will be made after further investigation, which
includes sampling, of the property.

Substantial expenditures are required to establish ore reserves through
drilling, to determine metallurgical processes to extract the metals from the
ore and, in the case of new properties, to construct mining and processing
facilities. At December 31, 2003, we did not have any ore reserves for the
Nugget Field Prospect.

The bonding requirements for the Nugget Field Prospect established by BLM
were met by Apollo Gold Exploration, Inc., through the following bond
instruments:



TYPE OF BONDING PENAL SUM AS AT YEAR END
- ------------------------------------------------------- ---------------------------
2002 2003
- ------------------------------------------------------- ---------------------------

Personal bond secured by irrevocable stand-by letter of
credit issued by Washington Mutual Bank: $ 0 $ 7,336
- ------------------------------------------------------- ---------- ---------------
TOTAL BONDING REQUIREMENT MET: $ 0 $ 7,336
- ------------------------------------------------------- ---------- ---------------


Our obligation to reimburse Washington Mutual Bank for any drawing under
the letter of credit is secured by our maintenance of an amount equal to the
amount available for drawing in a deposit account pledged to Washington Mutual
Bank. We pay an annual letter of credit fee equal to 2% of the amount available
for drawing. We earn interest on the deposit account at a rate established by
Washington Mutual Bank from time to time.

DIAMOND HILL

Diamond Hill, an underground gold mine, is owned and maintained by Montana,
Inc.

Since production commenced in 1996, Diamond Hill has mined over 775,000
tons of ore at an average grade of 0.233 ounces per ton gold. During 1998,
Diamond Hill achieved an annual production of over 240,000 tons. Operations
ceased in 2000.


38

Location. Diamond Hill is located approximately 28 miles southeast of
Helena, Montana, in Broadwater County and on the east flank of the Elkhorn
Mountains, within the Hassel Mining District.

Geology. Diamond Hill covers over 2,590 acres of patented and unpatented
claims. We have 100% ownership of the main patented claims that contain the
current deposits, subject to a 0.5 to 1% net smelter return and a 10% net
profits royalty. We also have 50% ownership of four additional patented claims,
which are peripheral to the main land package. As of December 31, 2003, we hold
103 unpatented claims and lease 19 unpatented claims. The current mine permit
covers 270 acres with most of the disturbance within a 27-acre area.

The Diamond Hill ore bodies and mine workings are in solid unfractured rock
and accordingly are amenable to low cost sublevel open stoping methods. Ore was
transported to the Montana Tunnels mill facility by truck. There it was
processed in a separate circuit designed for Diamond Hill ore. Most gold was
recovered into a high grade pyrite concentrate and sold to Japanese smelters.

The mine is located in volcanic rocks adjacent to the Boulder Batholith, a
dominant igneous intrusion that also hosts the famous Butte Copper mining
district. The deposit is classed as a skarn hosted sulfide deposit where the
predominant ore mineralogy is gold associated with pyrite and lesser other metal
sulfides.

Target. Diamond Hill is currently on a standby care-and-maintenance basis.
Although it is fully permitted to allow resumption of production, return of the
mine to production would depend upon the success in finding additional ore. No
exploration effort is currently planned.

An estimate of the ultimate values of these deposits can, at present, only
be derived by considering known deposits in the area. There can be no assurance,
however, that we will be able to locate or extract any material quantity of gold
or other metals at the Diamond Hill Mine, or that any mining activities at that
site would be profitable. In 2003, we did not conduct any exploration drilling
on Diamond Hill. We are actively seeking to find a joint venture participant to
share the risks of future activities or to divest the Diamond Hill Project.
There can be no assurance that those efforts will be successful.

Substantial expenditures are required to establish ore reserves through
drilling and to determine metallurgical processes to extract the metals from the
ore. At December 31, 2003, we did not have any ore reserves for Diamond Hill.

Montana, Inc. met the bonding requirements for the Diamond Hill Project
established by the State of Montana through the following bonding instruments:



TYPE OF BONDING PENAL SUM AS AT YEAR END
- ---------------------------------------------------------- ---------------------------
2002 2003
- ---------------------------------------------------------- ---------------------------

Savings Certificate Assignment with respect to certificate
of deposit maintained with US Bank: $ 622,512 $ 622,512
- ---------------------------------------------------------- ---------- ---------------
TOTAL BONDING REQUIREMENT MET: $ 622,512 $ 622,512
- ---------------------------------------------------------- ---------- ---------------


We do not incur any fees in connection with the US Bank Savings Certificate
Assignment. We earn interest on the deposit account at a rate established by
U.S. Bank from time to time.


39

STANDARD MINE AREA

The Standard Mine Area is discussed above in the Florida Canyon Mine
section. Historically, the Standard Mine Area has been operated in conjunction
with the Florida Canyon Mine. In view of the relatively advanced stage of
exploration and the geographical separation from the Florida Canyon Mine, we
transferred the Standard Mine Area into one of our wholly-owned subsidiaries,
Standard Gold Mining, Inc. so that we may maintain it as a separate operation.
In addition, we anticipate transferring other Florida, Inc. assets that need
additional exploration to our exploration subsidiary, Apollo Gold Exploration,
Inc. We are presently conducting development activities at the Standard Mine
Area. In March 2003, we applied to the Nevada Environmental Protection Bureau
of Mining Regulation and Reclamation Division for permits for the Standard Mine
Area. The permits would allow us to mine up to 25 million tons of ore and would
allow mining, mineral processing, reclamation and related activities. Until such
permits are approved, we may not conduct such operations at the Standard Mine
Area.

Buffalo Canyon consists of approximately 480 acres and is located
immediately south and is contiguous to the Standard Mine Area in Humboldt
County, Nevada. Buffalo Canyon is located on new property acquired by us in 2003
and added to our Standard Mine land package. We completed the Phase 1 drilling
program (a total of 5,040 feet of reverse circulation drilling in 13 holes) at
the Buffalo Canyon in December 2003.

Buffalo Canyon has a northern target, eastern target and southern target.
We believe the most favorable area for mining is the northern target based upon
a preliminary sectional model. In addition, the northern target returned
favorable drilling results and we intend to initiate additional drilling in the
future. Results from the eastern target were not as favorable and initial
drilling in this area is not high-priority based on our present understanding of
controls on mineralization. Results from the central target warrant no further
drilling in this area.

WILLOW CREEK

Willow Creek is located in the east range of Pershing County, Nevada. Our
unpatented claims are located in an area of significant placer mining and
limited high grade underground production. Geologic mapping, sampling and
target definition is planned in 2004 for this new exploration project.

REGULATION OF MINING ACTIVITY

Our U.S. mining operations are subject to inspection and regulation by the
Mine Safety and Health Administration of the Department of Labor ("MSHA") under
provisions of the Federal Mine Safety and Health Act of 1977. MSHA directives
have had no material adverse impact on our results of operations or financial
condition and we believe that we are substantially in compliance with the
regulations promulgated by MSHA.

All of our exploration, development and production activities in the United
States and Canada are subject to regulation by governmental agencies under one
or more of the various environmental laws including but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA" or "Superfund"), which regulates and establishes liability for
the release of hazardous substances, and the Endangered Species Act ("ESA"),
which identifies endangered species of plants and animals and regulates
activities to protect these species and their habitats. These laws address
emissions to the air, discharges to water, management of wastes, management of
hazardous substances, protection of natural resources, protection of antiquities


40

and reclamation of lands which are disturbed. We believe that we are in
substantial compliance with applicable environmental regulations. Many of the
regulations also require permits to be obtained for our activities. These
permits normally are subject to public review processes resulting in public
approval of the activity. While these laws and regulations govern how we
conduct many aspects of our business, our management does not believe that they
have a material adverse effect on our results of operations or financial
condition at this time. Our projects are evaluated considering the cost and
impact of environmental regulation on the proposed activity. New laws and
regulations are evaluated as they develop to determine the impact on, and
changes necessary to, our operations. It is possible that future changes in
these laws or regulations could have a significant impact on some portion of our
business, causing those activities to be economically reevaluated at that time.
We believe that adequate provision has been made for disposal of mine waste and
mill tailings at all of our operating and non operating properties in a manner
that complies with current federal, state and provincial environmental
requirements.

Environmental laws and regulations may also have an indirect impact on us,
such as increased cost for electricity. Charges by smelters to which we sell
our metallic concentrates and products have substantially increased over the
past several years because of requirements that smelters meet revised
environmental quality standards. We have no control over the smelters'
operations or their compliance with environmental laws and regulations. If the
smelting capacity available to us was significantly reduced because of
environmental requirements or otherwise, it is possible that our operations
could be adversely affected. See "Risk Factors - We Face Substantial Government
Regulation and Environmental Risks."

LEGISLATION

From time to time, the U.S. Congress considers proposed amendments to the
General Mining Law of 1872, as amended, which governs mining claims and related
activities on federal lands. Legislation previously introduced in Congress
would have changed the current patent procedures, imposed certain royalties on
production and enacted new reclamation, environmental controls and restoration
requirements with respect to mining activities on federal lands. Although a
majority of our existing mining operations occur on private or patented
property, changes to the General Mining Law, if adopted, could adversely affect
our ability to economically develop mineral resources on federal lands. See
"Risk Factors - We Face Substantial Government Regulation."

Our Canadian mining operations and exploration activities are subject to
extensive federal, provincial, state and local laws and regulations governing
prospecting, development, production, exports, taxes, labor standards,
occupational health and safety, mine safety and other matters. Compliance with
such laws and regulations increases the costs of planning, designing, drilling,
developing, constructing, operating and closing mines and other facilities.
Such laws and regulations are subject to change and any amendments to current
laws and regulations governing operations and activities of mining companies or
more stringent implementation or interpretation thereof could have a material
adverse impact on us, cause a reduction in levels of production and delay or
prevent the development of new mining properties.

EMPLOYEES

As of March 15, 2004, we employed approximately 455 full time permanent
employees at our operations in the United States and Canada. None of our
employees are members of a labor union. Of these employees, approximately 440
are employed in mining operations, 10 in management and 5 in administrative


41

functions. As of March 15, 2004, the Florida Canyon Mine and the Montana
Tunnels Mine employed approximately 185 and 253 full time non-unionized
employees, respectively. We believe that relations with our employees are
good.

FACILITIES

Our mineral properties are described above. Our executive corporate office
is located at 4601 DTC Boulevard, Suite 750, Denver, Colorado 80237-2571. Our
registered office is located at Suite 300, 204 Black Street, Whitehorse, Yukon
Territory, Canada Y1A 2M9. We lease a portion of the building used for our
executive corporate offices. We believe that our existing facilities are
sufficient for our intended purposes.

RISK FACTORS

Any of the following risks could materially adversely affect our business,
financial condition, or operating results and could negatively impact the value
of our common shares. These risks have been separated into two groups: risks
relating to our operations and risks related to the metals mining industry
generally.

RISKS RELATING TO OUR OPERATIONS

WE ARE THE PRODUCT OF A RECENT MERGER, AND HAVE A LIMITED OPERATING HISTORY
ON WHICH TO EVALUATE OUR POTENTIAL FOR FUTURE SUCCESS.

We were formed as a result of a merger of two separate companies, Nevoro
and Pursuit, in June 2002, and to date have only six fiscal quarters of combined
operations. While both Nevoro's wholly-owned subsidiary, Apollo Gold, Inc., and
Pursuit had a prior operating history, we have only a limited operating history
as a combined company, upon which you can evaluate our business and prospects,
and we have yet to develop sufficient experience regarding actual revenues to be
received from our combined operations. Pursuit had net losses of $454,000,
$420,0000 and $1,535,000 for the respective years ended December 31, 2001, 2000
and 1999. The operations of Apollo Gold, Inc. were profitable in 2001, prior to
the Plan of Arrangement. For the year ended December 31, 2003 we had a loss of
approximately $2,186,000 and for the year ended December 31, 2002 we had a loss
of approximately $3,051,000.

You must consider the risks and uncertainties frequently encountered by
companies in situations such as ours, including but not limited to the ability
to integrate our operations and eliminate duplicative costs. If we are
unsuccessful in addressing these risks and uncertainties, our business, results
of operations and financial condition will be materially and adversely affected.

WE MAY BE INVOLVED IN ONGOING LITIGATION THAT MAY ADVERSELY AFFECT US FROM
TIME TO TIME.

We are engaged in litigation from time to time. On May 29, 2003 we
successfully defended Safeco Insurance Company of America's ("Safeco's") appeal
involving a mining reclamation bond in the amount of $16,936,130 issued by
Safeco. The purpose of the bond is to provide financial guarantees to the
United States Government to ensure that our Florida Canyon Mine in Pershing
County, Nevada, will be reclaimed in the event we fail to do so. The provision
of such financial guarantee is a condition of our operating permit. Loss of the
litigation would have required us to find replacement bonding in a material
amount. If any future claims result in a judgment against us or are settled on


42

unfavorable terms, our results of operations, financial condition and cash flows
could be materially adversely affected. We are not engaged in any material
litigation at this time. See "Legal Proceedings."

WE ARE DEPENDENT ON CERTAIN KEY PERSONNEL.

We are currently dependent upon the ability and experience of R. David
Russell, our President and Chief Executive Officer; R. Llee Chapman, our Vice
President-Finance, Chief Financial Officer, Treasurer and Controller; Richard F.
Nanna, our Vice President-Exploration; David K. Young, our Vice
President-Business Development; Donald W. Vagstad, our Vice President-Legal,
General Counsel and Secretary; Wade Bristol, our Vice President-United States
Operations; Melvyn Williams, our Senior Vice President-Finance and Corporate
Development; and Donald O. Miller, our Vice President-Human Resources and
Administration. There can be no assurance that we will be able to retain any or
all of such officers. We currently do not carry key person insurance on any of
these individuals, and the loss of one or more of them could have a material
adverse effect on our operations. We have entered into employment agreements
with each of Messrs. Russell, Chapman, Nanna, Young, Vagstad and Bristol which
provide for certain payments upon termination or resignation resulting from a
change of control (as defined in such agreements). We compete with other
companies both within and outside the mining industry in connection with the
recruiting and retention of qualified employees knowledgeable in mining
operations.

RISKS RELATING TO THE METALS MINING INDUSTRY

OUR EARNINGS MAY BE AFFECTED BY METALS PRICE VOLATILITY, SPECIFICALLY THE
VOLATILITY OF GOLD AND ZINC PRICES.

We derive all of our revenues from the sale of gold, silver, lead and zinc
and, as a result, our earnings are directly related to the prices of these
metals. Changes in the price of gold significantly affect our profitability.
Gold prices historically have fluctuated widely, based on numerous industry
factors including:

- industrial and jewelry demand;

- central bank lending, sales and purchases of gold;

- forward sales of gold by producers and speculators;

- production and cost levels in major gold-producing regions; and

- rapid short-term changes in supply and demand because of speculative
or hedging activities;

Gold prices are also affected by macroeconomic factors, including:

- confidence in the global monetary system;

- expectations of the future rate of inflation (if any);

- the strength of, and confidence in, the U.S. dollar (the currency in
which the price of gold is generally quoted) and other currencies;


43

- interest rates; and

- global or regional political or economic events, including but not
limited to acts of terrorism.

The current demand for, and supply of, gold also affects gold prices. The
supply of gold consists of a combination of new production from mining and of
existing stocks of bullion held by government central banks, public and private
financial institutions, industrial organizations and private individuals. As
the amounts produced by all producers in any single year constitute a small
portion of the total potential supply of gold, normal variations in current
production do not usually have a significant impact on the supply of gold or on
its price. Mobilization of gold stocks held by central banks through lending
and official sales may have a significant adverse impact on the gold price. If
revenue from gold sales decline for a substantial period below the cost of
production at any or all of our operations, we could be required to reduce our
reserves and make a determination that it is not economically feasible to
continue either the commercial production at any or all of our current
operations or the exploration at some or all of our current projects.

Price volatility also appears in the silver, zinc and lead markets. In
particular, our Montana Tunnels Mine has historically produced approximately 45
million pounds of these metals annually, and therefore we are subject to factors
such as world economic forces and supply and demand.

All of the above factors are beyond our control and are impossible for us
to predict. If the market prices for these metals fall below our costs to
produce them for a sustained period of time, we will experience additional
losses and may have to discontinue exploration and/or mining at one or more of
our properties.

On March 15, 2004, the closing prices for gold, silver, zinc and lead were
$398.10 per ounce, $7.10 per ounce, $0.50 per pound and $0.406 per pound,
respectively.

THE VOLATILITY OF METALS PRICES MAY ALSO ADVERSELY AFFECT OUR EXPLORATION
EFFORTS.

Our ability to produce gold, silver, zinc and lead in the future is
dependent upon our exploration efforts, and our ability to develop new ore
reserves. If prices for these metals decline, it may not be economically
feasible for us to continue our exploration of a project or to continue
commercial production at some or all of our properties.

OUR ORE RESERVE ESTIMATES MAY NOT BE REALIZED.

We estimate our reserves on our properties as either "proven reserves" or
"probable reserves". Our ore reserve figures and costs are primarily estimates
and are not guarantees that we will recover the indicated quantities of these
metals. We estimate proven reserve quantities through extensive sampling and
testing of sites containing the applicable ore that allow us to have an
established estimate as to the amount of such ore that we expect to extract from
a site. Such sampling and tests are conducted by us and by an independent
company hired by us. Probable reserves are computed with information similar to
that used for proven resources, but the sites for sampling are less extensive,
and the degree of certainty as to the content of a site is less. Reserves are
estimates made by our technical personnel and no assurance can be given that the


44

estimate of the amount of metal or the indicated level of recovery of these
metals will be realized. Reserve estimation is an interpretive process based
upon available data. Further, reserves are based on estimates of current costs
and prices. Our reserve estimates for properties that have not yet started may
change based on actual production experience. In addition, the economic value
of ore reserves may be adversely affected by:

- declines in the market price of the various metals we mine;

- increased production or capital costs; or

- reduced recovery rates.

Reserve estimates will change as existing reserves are depleted through
production, as well as changes in estimates caused by changing production cost
and/or metals prices. Changes in reserves may also reflect that grades of ore
fed to process may be different from stated reserve grades because of variation
in grades in areas mined, mining dilution, recoveries and other factors.
Reserves estimated for properties that have not yet commenced production may
require revision based on actual production experience.

Declines in the market price of metals, as well as increased production,
capital costs and reduced recovery rates, may render ore reserves uneconomic to
exploit unless the utilization of forward sales contracts or other hedging
techniques is sufficient to offset such effects. If our realized price for the
metals we produce were to decline substantially below the levels set for
calculation of reserves for an extended period, there could be material delays
in the exploration of new projects, increased net losses, reduced cash flow,
restatements or reductions in reserves and asset write-downs in the applicable
accounting periods. Reserves should not be interpreted as assurances of mine
life or of the profitability of current or future operations. No assurance can
be given that the estimate of the amount of metal or the indicated level of
recovery of these metals will be realized.

WE MAY NOT ACHIEVE OUR PRODUCTION ESTIMATES.

We prepare estimates of future production for our operations. We develop
our plans based on, among other things, mining experience, reserve estimates,
assumptions regarding ground conditions and physical characteristics of ores
(such as hardness and presence or absence of certain metallurgical
characteristics) and estimated rates and costs of mining and processing. Our
actual production may vary from estimates for a variety of reasons, including:

- risks and hazards of the types discussed in this section;

- actual ore mined varying from estimates of grade, tonnage, dilution
and metallurgical and other characteristics;

- short-term operating factors relating to the ore reserves, such as the
need for sequential development of ore bodies and the processing of
new or different ore grades;

- mine failures, pit wall cave-ins or equipment failures;

- natural phenomena such as inclement weather conditions, floods and
earthquakes;


45

- unexpected labor shortages or strikes;

- restrictions or regulations imposed by government agencies; and

- litigation pursued by governmental agencies or environmental groups.

Each of these factors also applies to sites not yet in production and to
operations that are to be expanded. In these cases, we do not have the benefit
of actual experience in our estimates, and there is a greater likelihood that
the actual results will vary from the estimates.

THE SUCCESS OF OUR EXPLORATION PROJECTS IS UNCERTAIN.

From time to time we will engage in the exploration of new ore bodies. Our
ability to sustain or increase our present level of production is dependent in
part on the successful exploration of such new ore bodies and/or expansion of
existing mining operations. The economic feasibility of such exploration
projects is based upon many factors, including:

- estimates of reserves;

- metallurgical recoveries;

- capital and operating costs of such projects; and

- future gold/metal prices.

Exploration projects are also subject to the successful completion of
feasibility studies, issuance of necessary governmental permits and receipt of
adequate financing.

Exploration projects have no operating history upon which to base estimates
of future cash flow. Our estimates of proven and probable ore reserves and cash
operating costs are, to a large extent, based upon detailed geologic and
engineering analysis. We also conduct feasibility studies that derive estimates
of capital and operating costs based upon many factors, including:

- anticipated tonnage and grades of ore to be mined and processed;

- the configuration of the ore body;

- ground and mining conditions;

- expected recovery rates of the gold from the ore; and

- anticipated environmental and regulatory compliance costs.

It is possible that actual costs and economic returns may differ materially
from our best estimates. It is not unusual in the mining industry for new
mining operations to experience unexpected problems during the start-up phase
and to require more capital than anticipated.

ORE EXPLORATION IN GENERAL, AND GOLD EXPLORATION IN PARTICULAR, ARE
SPECULATIVE.


46

Exploration for ore is speculative, and gold exploration is highly
speculative in nature. Exploration projects involve many risks and frequently
are unsuccessful. There can be no assurance that our future exploration efforts
for gold or other metals will be successful. Success in increasing our reserves
will be the result of a number of factors, including the following:

- quality of management;

- geological and technical expertise;

- quality of land available for exploration; and

- capital available for exploration.

If we discover a site with gold or other mineralization, it may take
several years from the initial phases of drilling until production is possible.
Mineral exploration, particularly for gold and silver, is highly speculative in
nature, capital intensive, involves many risks and frequently is nonproductive.
There can be no assurance that our mineral exploration efforts will be
successful. Once mineralization is discovered, it may take a number of years
from the initial phases of drilling until production is possible, during which
time the economic feasibility of production may change. Substantial
expenditures are required to establish ore reserves through drilling, to
determine metallurgical processes to extract the metals from the ore and, in the
case of new properties, to construct mining and processing facilities. As a
result of these uncertainties, no assurance can be given that our exploration
programs will result in the expansion or replacement of existing ore reserves
that are being depleted by current production.

WE ARE DEPENDENT UPON OUR MINING PROPERTIES.

All of our revenues are currently derived from our mining and milling
operations at the Montana Tunnels Mine and Florida Canyon Mine, which are low
grade mines. If operations at either of these mines or at any of our processing
facilities are reduced, interrupted or curtailed, as a result of natural
phenomena, equipment malfunction or otherwise, our ability to generate future
revenues and profits could be materially adversely affected.

POSSIBLE HEDGING ACTIVITIES COULD EXPOSE US TO LOSSES.

We have entered into hedging contracts for gold in the aggregate amount of
100,000 ounces involving the use of put and call options. The contracts give
the holder the right to buy and us the right to sell stipulated amounts of gold
at the upper and lower exercise prices, respectively. The contracts continue
through April 25, 2005, with a put option of $295 per ounce and a call option of
$345 per ounce. As at February 29, 2004, 72,280 ounces remained outstanding on
these contracts. In the future, we may enter into additional hedging contracts
that may involve outright forward sales contracts, spot-deferred sales
contracts, the use of options which may involve the sale of call options and the
purchase of all these hedging instruments. See "Selected Financial Information
- - Hedging Activities."

WE FACE SUBSTANTIAL GOVERNMENTAL REGULATION.

Safety. Our U.S. mining operations are subject to inspection and regulation
by the Mine Safety and Health Administration of the United States Department of
Labor ("MSHA") under the provisions of the Mine Safety and Health Act of 1977.


47

The Occupational Safety and Health Administration ("OSHA") also has jurisdiction
over safety and health standards not covered by MSHA. Our policy is to comply
with applicable directives and regulations of MSHA and OSHA.

Current Environmental Laws and Regulations. We must comply with
environmental standards, laws and regulations that may result in greater or
lesser costs and delays depending on the nature of the regulated activity and
how stringently the regulations are implemented by the regulatory authority.
The costs and delays associated with compliance with such laws and regulations
could stop us from proceeding with the exploration of a project or the operation
or future exploration of a mine. Laws and regulations involving the protection
and remediation of the environment and the governmental policies for
implementation of such laws and regulations are constantly changing and are
generally becoming more restrictive. We have made, and expect to make in the
future, significant expenditures to comply with such laws and regulations.
These requirements include regulations under many state and U.S. federal laws
and regulations, including:

- the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA" or "Superfund") which regulates and establishes
liability for the release of hazardous substances;

- the U.S. Endangered Species Act;

- the Clean Water Act;

- the Clean Air Act;

- the U.S. Resource Conservative and Recovery Act ("RCRA");

- the Migratory Bird Treaty Act;

- the Safe Drinking Water Act;

- the Emergency Planning and Community Right-to-Know Act;

- the Federal Land Policy and Management Act;

- the National Environmental Policy Act; and

- the National Historic Preservation Act.

The United States Environmental Protection Agency continues the development
of a solid waste regulatory program specific to mining operations such as ours,
where the mineral extraction and beneficiation wastes are not regulated as
hazardous wastes under RCRA.

Some of our partially owned properties are located in historic mining
districts with past production and abandoned mines. The major historical mine
workings and processing facilities owned (wholly or partially) by us are being
targeted by the Montana Department of Environmental Quality ("MDEQ") for
publicly-funded cleanup, which reduces our exposure to financial liability. We
are participating with the MDEQ under Voluntary Cleanup Plans on those sites.
Our cleanup responsibilities have been completed at the Corbin Flats ("CECRA")
Facility and at the Gregory Mine site, both located in Jefferson County,
Montana, under programs involving cooperative efforts with the MDEQ. The Corbin
Flats CECRA Facility was the MDEQ's number one priority site in Jefferson County


48

targeted for cleanup under the Montana Comprehensive Environmental Cleanup and
Responsibility Act ("CECRA"). The MDEQ has reimbursed us for more than half of
our cleanup costs at the Corbin Flats CECRA Facility under two Montana State
public environmental cleanup funding programs. MDEQ has completed remediation
of the Washington Mine site at public expense under the Surface Mining Control
and reclamation Act of 1977 ("SMCRA"). In February 2004 we consented to MDEQ's
entry onto the portion of the Washington Mine site owned by us to undertake
publically-funded remediation under SMCRA. In March, 2004, we entered into a
definitive written settlement agreement with MDEQ and the BLM under which MDEQ
will conduct publicly-funded remediation of the Wickes Smelter site under SMCRA
and will grant us a site release in exchange for our donation of the portion of
the site owned by us to BLM for use as a waste repository. However, there can
be no assurance that we will continue to resolve disputed liability for
historical mine and ore processing facility waste sites on such favorable terms
in the future. We remain exposed to liability, or assertions of liability that
would require expenditure of legal defense costs, under joint and several
liability statutes for cleanups of historical wastes that have not yet been
completed.

Environmental laws and regulations may also have an indirect impact on us,
such as increased costs for electricity due to acid rain provisions of the
United States Clean Air Act Amendments of 1990. Charges by refiners to which we
sell our metallic concentrates and products have substantially increased over
the past several years because of requirements that refiners meet revised
environmental quality standards. We have no control over the refiners'
operations or their compliance with environmental laws and regulations.

Potential Legislation. Changes to the current laws and regulations
governing the operations and activities of mining companies, including changes
in permitting, environmental, title, health and safety, labor and tax laws, are
actively considered from time to time. We cannot predict such changes, and such
changes could have a material adverse impact on our business. Expenses
associated with the compliance with such new laws or regulations could be
material. Further, increased expenses could prevent or delay exploration
projects and could therefore affect future levels of mineral production.

WE ARE SUBJECT TO ENVIRONMENTAL RISKS.

Environmental Liability. We are subject to potential risks and liabilities
associated with pollution of the environment and the disposal of waste rock and
materials that could occur as a result of our mineral exploration and
production. To the extent that we are subject to environmental liabilities, the
payment of such liabilities or the costs that we may incur to remedy
environmental pollution would reduce funds otherwise available to us and could
have a material adverse effect on our financial condition or results of
operations. If we are unable to fully remedy an environmental problem, we might
be required to suspend operations or enter into interim compliance measures
pending completion of the required remedy. The potential exposure may be
significant and could have a material adverse effect on us. We have not
purchased insurance for environmental risks (including potential liability for
pollution or other hazards as a result of the disposal of waste products
occurring from exploration and production) because it is not generally available
at a reasonable price.

Environmental Permits. All of our exploration, development and production
activities are subject to regulation under one or more of the various state,
federal and provincial environmental laws and regulations in Canada and the U.S.
Many of the regulations require us to obtain permits for our activities. We
must update and review our permits from time to time, and are subject to


49

environmental impact analyses and public review processes prior to approval of
the additional activities. It is possible that future changes in applicable
laws, regulations and permits or changes in their enforcement or regulatory
interpretation could have a significant impact on some portion of our business,
causing those activities to be economically reevaluated at that time. Those
risks include, but are not limited to, the risk that regulatory authorities may
increase bonding requirements beyond our financial capabilities. The posting of
bonding in accordance with regulatory determinations is a condition to the right
to operate under all material operating permits, and therefore increases in
bonding requirements could prevent our operations from continuing even if we
were in full compliance with all substantive environmental laws.

WE FACE STRONG COMPETITION FROM OTHER MINING COMPANIES FOR THE ACQUISITION
OF NEW PROPERTIES.

Mines have limited lives and as a result, we may seek to replace and expand
our reserves through the acquisition of new properties. In addition, there is a
limited supply of desirable mineral lands available in the United States and
other areas where we would consider conducting exploration and/or production
activities. Because we face strong competition for new properties from other
mining companies, some of whom have greater financial resources than we do, we
may be unable to acquire attractive new mining properties on terms that we
consider acceptable.

THE TITLES TO SOME OF OUR UNITED STATES PROPERTIES MAY BE DEFECTIVE.

Certain of our mineral rights consist of "unpatented" mining claims created
and maintained in accordance with the U.S. General Mining Law of 1872.
Unpatented mining claims are unique U.S. property interests, and are generally
considered to be subject to greater title risk than other real property
interests because the validity of unpatented mining claims is often uncertain.
This uncertainty arises, in part, out of the complex federal and state laws and
regulations under the General Mining Law. Also, unpatented mining claims are
always subject to possible challenges by third parties or contests by the
federal government. The validity of an unpatented mining claim, in terms of
both its location and its maintenance, is dependent on strict compliance with a
complex body of federal and state statutory and decisional law. In addition,
there are few public records that definitively control the issues of validity
and ownership of unpatented mining claims.

In recent years, the U.S. Congress has considered a number of proposed
amendments to the General Mining Law. Although no such legislation has been
adopted to date, there can be no assurance that such legislation will not be
adopted in the future. If ever adopted, such legislation could, among other
things, impose royalties on gold production from currently unpatented mining
claims located on federal lands. If such legislation is ever adopted, it could
have an adverse impact on earnings from our operations, could reduce estimates
of our reserves and could curtail our future exploration and development
activity on federal lands.

While we have no reason to believe that the existence and extent of any of
our properties are in doubt, title to mining properties are subject to potential
claims by third parties claiming an interest in them. The failure to comply
with all applicable laws and regulations, including failure to pay taxes, carry
out and file assessment work, may invalidate title to portions of the properties
where the mineral rights are not owned by us.

OUR OPERATIONS MAY BE ADVERSELY AFFECTED BY RISKS AND HAZARDS ASSOCIATED
WITH THE MINING INDUSTRY.


50

Our business is subject to a number of risks and hazards including:

- environmental hazards;

- political and country risks;

- industrial accidents;

- labor disputes;

- unusual or unexpected geologic formations;

- cave-ins;

- slope failures and landslides; and

- flooding and periodic interruptions due to inclement or hazardous
weather conditions.

Such risks could result in:

- damage to or destruction of mineral properties or producing
facilities;

- personal injury or death;

- environmental damage;

- delays in mining;

- monetary losses; and

- legal liability.

For some of these risks, we maintain insurance to protect against these
losses at levels consistent with our historical experience and industry
practice. However, we may not be able to maintain this insurance, particularly
if there is a significant increase in the cost of premiums. Insurance against
environmental risks is generally too expensive for us and other companies in our
industry, and, therefore, we do not maintain environmental insurance. Recently
we have experienced several slides at our Montana Tunnels Mine that has affected
our milling operations causing us to lose valuable production time and
consequently reducing our revenues. To the extent we are subject to
environmental liabilities, we would have to pay for these liabilities.
Moreover, in the event that we are unable to fully pay for the cost of remedying
an environmental problem, we might be required to suspend operations or enter
into other interim compliance measures.

SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements that
reflect our current expectations and projections about our future results,
performance, prospects, and opportunities. We have tried to identify these
forward-looking statements by using words such as "may," "expect," "anticipate,"
"believe," "intend," "plan," "estimate," and similar expressions. These


51

forward-looking statements are based on information currently available to us
and are subject to a number of risks, uncertainties, and other factors that
could cause our actual results, performance, prospects, or opportunities to
differ materially from those expressed in, or implied by, these forward-looking
statements. These risks, uncertainties, and other factors include, but are not
limited to:

- metal prices and price volatility;

- amount of metal production;

- costs of production;

- remediation, reclamation, and environmental costs;

- regulatory matters;

- the results or settlement of pending litigation;

- cash flow;

- revenue calculations;

- the nature and availability of financing; and

- project risks.

See "Risk Factors" for a description of these factors. Other matters,
including unanticipated events and conditions, also may cause our actual future
results to differ materially from these forward-looking statements. We cannot
assure you that our expectations will prove to be correct. In addition, all
subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements mentioned above. You should not place undue reliance on
these forward-looking statements. All of these forward-looking statements are
based on our expectations as of the date of this Annual Report on Form 10-K.
Except as required by federal securities laws, we do not intend to update or
revise any forward-looking statements, whether as a result of new information,
future events, or otherwise.

ITEM 3. LEGAL PROCEEDINGS

SAFECO LITIGATION

We have successfully defended an appeal following litigation involving a
mining reclamation bond in the amount of $16,936,130 (the "Bond") issued by
Safeco Insurance Company of America ("Safeco").

The purpose of the bond is to provide financial guarantees to the United
States to ensure that our Florida Canyon Mine in Pershing County, Nevada, will
be reclaimed in the event we fail to do so. The provision of such financial
guarantee is a condition of our operating permit. Loss of the litigation would
require us to find replacement bonding in a material amount.


52

During the bankruptcy proceedings of Pegasus Gold Corporation, Safeco
stated that it intended to cancel our bond at its first opportunity and
suggested that its obligations for post-cancellation coverage would be
exonerated if we continued to mine after cancellation. By letter dated May 12,
1999, Safeco cancelled the bond. On May 13, 1999, Safeco filed an action in the
United States District Court for the Western District of Washington, Safeco
Insurance Company of America v. Florida Canyon Mining, Inc., Case No. C99 0766Z,
seeking a declaration that it was entitled to cancel the bond and that its
post-cancellation coverage obligations do not extend to post-cancellation
disturbances.

On June 21, 1999, we answered Safeco's complaint and asserted a
counterclaim against Safeco for declaratory judgment, anticipatory breach of
contract, and breach of the surety's duty of good faith, based on Safeco's
wrongful disclaimer of its post-cancellation obligations. On July 6, 1999, we
moved to transfer the action from the Western District of Washington to the
District of Nevada and for an expedited, partial summary judgment that the Bond
remains in full force and effect after cancellation as to all areas disturbed
prior to the effective date of cancellation. Our motion to transfer the action
to the District of Nevada was granted on August 2, 1999.

On August 10, 1999, the United States District Court for the District of
Nevada granted partial summary judgment in favor of us on Count I of our
counterclaim, holding that the Bond "shall remain in full force and effect as to
all areas disturbed within the plan of operations prior to the effective date of
cancellation," that the Bond's language "encompasses further disturbances to
previously disturbed areas within the plan of operations which may occur after
the effective date of cancellation," and that "SAFECO's liability shall continue
irrespective of continued mining activities, after the effective date of
cancellation, within the areas of the plan of operations disturbed prior to the
effective date of cancellation." The Court denied our prayers for damages and
attorney's fees against Safeco. The Court also consolidated the transferred
action with a related case that had been filed against Safeco on July 2, 1999,
by the United States and the State of Nevada, United States et al. v. Safeco
Insurance Company of America, CV-N-99-00361-DWH (PHA). On August 30, 1999,
Safeco moved for reconsideration of the order granting our partial motion for
summary judgment. On August 14, 2000, the court denied Safeco's motion.

By stipulation entered by the Court on February 15, 2002, we agreed with
the United States, State of Nevada and Safeco as to the area of the Florida
Canyon Mine disturbed as of August 15, 1999. That stipulation resolved the last
substantive issue in dispute in the litigation.

Following the stipulation, the parties negotiated the form of final
judgment implementing the August 10, 1999, summary judgment order, the August
14, 2000, reconsideration denial order, and the February 15, 2002,
area-disturbed stipulation. The Court entered final judgment in the form
requested by the parties on March 8, 2002.

Safeco filed a notice of appeal from the final judgment and all underlying
orders. On May 12, 2003 the Ninth Circuit Court of Appeals heard oral arguments
of Safeco's appeal and underlying orders, and on May 29, 2003, a not for
publication memorandum decision was delivered by a three-judge panel affirming
the U.S. District Court judgment in our favor. Safeco did not file any notice
of appeal, and the period within which further appeal was permitted has lapsed.
Accordingly, the judgment of the District Court has become final.

We did not appeal the court's denial of our prayers for damages and
attorneys' fees against Safeco, and we do not expect otherwise to recover any
damages, litigation costs, or attorneys' fees from Safeco. Safeco's future
intentions with respect to the cancelled Safeco bond are not known.


53

At the time Safeco cancelled the Bond, Safeco also cancelled a similar
reclamation surety bond in the amount of $520,000 issued by Safeco, as surety,
on behalf of the former Diamond Hill, Inc., (a wholly-owned subsidiary of Apollo
Gold, Inc.), as principal, payable to the State of Montana, as beneficiary, to
secure Diamond Hill, Inc.'s reclamation obligations at Diamond Hill, Inc.'s mine
located in Broadwater County, Montana (the "Diamond Hill, Inc. Bond"). During
2001, following a protracted series of litigation proceedings brought,
variously, by Safeco, Diamond Hill, Inc., the United States, and the State of
Montana, before, variously, four different courts located in the States of
Washington and Montana, all issues were resolved by settlement agreement and all
legal proceedings were dismissed with prejudice. The settlement did not result
in any net loss of Safeco-furnished bonding for our subsidiaries as a whole nor
any other material loss or expense. As a part of the settlement, Diamond Hill,
Inc. waived recovery of any damages, litigation costs, or attorneys' fees from
Safeco in connection with the Diamond Hill, Inc. Bond.

STATE OF MONTANA, DEPARTMENT OF ENVIRONMENTAL QUALITY CLAIMS PROCEEDINGS RELATED
TO ENVIRONMENTAL MATTERS.

On or about August 3, 1998, during the course of Montana, Inc.'s Bankruptcy
Proceedings, the State of Montana, Department of Environmental Quality ("MDEQ")
filed several Proofs of Claim alleging that Montana, Inc. owed compliance
obligations to the State of Montana relating to several mining sites and
alleging, among other things, that Montana, Inc. had a general obligation to
continue to pay permit and license fees as they become due post-petition and to
continue to comply with all federal and state environmental statutes and
regulations governing operations. Montana, Inc. filed timely objections to the
MDEQ Proofs of Claim, and hearings on the MDEQ Proofs of Claim were held under
the Bankruptcy Courts Local Rule 3007, during which MDEQ and the Debtors
stipulated on the record of the hearing that determination of the merits of the
MDEQ Proofs of Claim should be determined after the confirmation hearing and
further negotiations and that the claims proceedings on all MDEQ Proofs of Claim
were to be taken off calendar without prejudice to be reset for hearing at a
date to be determined after confirmation proceedings on the Continuing Companies
Plan. Montana, Inc. and MDEQ have been in negotiations aimed at resolving the
MDEQ Proofs of Claim since November 23, 1998, and no further claims proceedings
in the Bankruptcy Court have been initiated by either party with respect to
MDEQs Proofs of Claim or Montana, Inc.'s objections. Montana, Inc.'s Plan of
Reorganization was confirmed and became effective on February 5, 1999. On
September 28, 2000, the Bankruptcy Court entered a Final Decree closing the
Montana, Inc. Bankruptcy Case but expressly reserving the Bankruptcy Courts
jurisdiction over the pending MDEQ Proofs of Claim.

Montana, Inc. believes that MDEQ's recovery of remediation costs as an
allowed administrative claim payable in cash (or as a post effective-date claim
not impacted by the plan of reorganization or bankruptcy laws at all), if any,
would be limited under applicable laws to remediation expenses involving
property owned by Montana, Inc. on or after January 16, 1998. Montana, Inc. is
not aware of any insurance polices that would respond to the MDEQ's
environmental claims and has not tendered its defense to any insurer at this
time. Montana, Inc. and MDEQ have made progress in negotiating resolutions of
MDEQ's environmental claims outside of judicial proceedings.

By settlement agreement dated August 14, 2001, Montana, Inc., and MDEQ
reached agreement on the Corbin Flats CECRA Facility site located in Jefferson
County, Montana, which is partially owned by Montana, Inc., and was contaminated
by 19th and early 20th Century ore processing wastes. Montana, Inc., has
completed its remediation obligations under the settlement agreement, has


54

received reimbursements from public funds in excess of 50% of the costs
incurred, and has posted a cash bond in the amount of $30,591 with MDEQ to
secure its on-going site operation, maintenance and monitoring obligations under
the settlement agreement. Pursuant to the settlement agreement, MDEQ has
formally withdrawn that part of its Proofs of Claim that relate to the Corbin
Flats CECRA Facility site.

By settlement agreement dated September 10, 2001, Montana, Inc., and MDEQ
also reached agreement on the Gregory Mine SMCRA site located in Jefferson
County, Montana, which is partially owned by Montana, Inc., and was contaminated
by 19th and early 20th Century mine tailing wastes. Under the agreement,
Montana, Inc., furnished in-kind remediation services to MDEQ, and MDEQ
conducted remediation at public expense under the Surface Mining Control and
Reclamation Act of 1977 ("SMCRA"). Montana, Inc. has completed its obligations
under the agreement and has received a site release from MDEQ.

By instrument dated February 13, 2004, Montana, Inc. has consented to
MDEQ's entry onto that part of the Washington Mine SMCRA site owned by it to
permit MDEQ to conduct remediation at public expense under SMCRA. The site is
located in Jefferson County, Montana, is contaminated by 19th and early 20th
Century mine tailings, and is partially owned by Montana, Inc. Montana, Inc.
has not agreed to make any payment or to perform any further services in
connection with MDEQ's remediation and has not received a site release.

By settlement agreement dated March 12, 2004, Montana, Inc., MDEQ, and BLM
have reached agreement on the Wickes Smelter SMCRA site located in Jefferson
County, Montana, which is partially owned by Montana, Inc., and is contaminated
by 19th and early 20th Century smelter wastes. Under the agreement, Montana,
Inc., will transfer title to the portion of the site it owns to BLM, MDEQ will
perform remediation at public expense under SMCRA, Montana, Inc. will receive a
site release, and MDEQ will join in a motion providing for withdrawal of that
part of MDEQ's Proofs of Claim that relate to the Wickes Smelter SMCRA site.

MDEQ and Montana, Inc. have not reached any agreement with respect to the
Jefferson City Yards site referred to in MDEQ's Proofs of Claim: a site located
in Jefferson County, Montana, which MDEQ believes is contaminated by ore
processing waste originating from the Corbin Flats CECRA site. Montana, Inc.
has no record of ever having owned any part of the Jefferson City Yards site.
The Jefferson City Yards site is the only site specifically referred to in the
MDEQ Proofs of Claim that has not yet been addressed.

MDEQ and Montana, Inc. are continuing discussions aimed at resolution of
the portion of MDEQ's Proofs of Claim that has not already been withdrawn.
There can be no assurance that Montana, Inc. will continue to have success in
negotiating favorable settlements of the outstanding portion of MDEQ Proofs of
Claim not already withdrawn by MDEQ.

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

No matters were submitted to a vote of security holders through the
solicitation of proxies or otherwise, during the quarter ended December 31,
2003.


PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS


55

Our common shares have been traded on the American Stock Exchange under the
trading symbol "AGT" since August 26, 2003.

Prior to August 26, 2003 and the Plan of Arrangement, our common shares
were listed on the Toronto Stock Exchange in Canada under the symbol "IPJ". On
July 3, 2002, we continued trading on the Toronto Stock Exchange under our new
name, Apollo Gold Corporation, and with a new ticker symbol, APG.U, until August
2, 2002, when it became APG. Quarterly high and low share prices, based on the
American Stock Exchange and Toronto Stock Exchange composite transactions, are
shown below (figures in brackets ( ) represent Canadian dollar equivalents):



American Stock Exchange
-------------------------
Year Quarter High Low
- ---- -------- ----- -----

2003 Fourth $2.64 $1.40
Third(1) $1.97 $1.58


(1) August 26, 2003 through September 30, 2003.




Toronto Stock Exchange
------------------------
Year Quarter High Low
- ------ ---------- ------------------- -------------------

2003 Fourth $ 2.60 (Cdn$3.42) $1.40 (Cdn$1.85)
Third $ 1.98 (Cdn$2.73) $1.63 (Cdn$2.20)
Second $ 2.34 (Cdn$3.45) $1.66 (Cdn$2.25)
First $ 2.75 (Cdn$4.20) $1.81 (Cdn$2.81)

2002 Fourth $ 2.28 (Cdn$3.60) $1.15 (Cdn$1.81)
Third $ 2.61 (Cdn$4.00) $0.88 (Cdn$1.40)
Second $ 0.21 (Cdn$0.34) $0.03 (Cdn$0.06)
First $ 0.09 (Cdn$0.14) $0.02 (Cdn$0.03)


At March 15, 2004, an aggregate of 75,031,198 of our common shares were
issued and outstanding and held by 1,831 shareholders of record. In addition,
12,192,507 warrants and options were issued and outstanding of which 4,415,468
issued and outstanding options were granted to our employees under our stock
option incentive plan and arrangement option plan.

We have not declared or paid any cash dividends on our capital stock or
other securities and do not anticipate paying any cash dividends in the
foreseeable future.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE
DATA)

Apollo Gold Corporation

The following table sets forth selected historical consolidated financial
data for Apollo Gold Corporation (formerly Pursuit) as of December 31, 2003,
2002, 2001, 2000 and 1999, derived from our audited financial statements. The
financial information for the year ended December 31, 2002 differs significantly
from the financial information for prior years as a result of the June 2002
acquisition of Nevoro. Financial information for 2001 and prior years is the
historical financial information of Pursuit. On June 25, 2002, Pursuit acquired


56

Nevoro and its wholly-owned subsidiary Apollo Gold, Inc.; accordingly, the
statement of operations of the Company for the year ended December 31, 2002
includes the results of Pursuit for the year ended December 31, 2002 and Nevoro
for the period from June 25, 2002 through December 31, 2002. Subsequent to June
25, 2002, substantially all of the gold mining and exploration business
conducted by the Company consists of the gold mining and exploration operations
of Apollo Gold, Inc. The data set forth below should be read in conjunction
with, and is qualified in its entirety by reference to, our financial statements
and notes thereto included elsewhere in this Form 10-K and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations".


57



(In Thousands of $, except for share amounts)

YEARS ENDED
DECEMBER 31,
-----------------------------------------------------------
2003 2002 2001 2000 1999
------------ ------------ --------- --------- ---------

Statements of Operations Data:
Revenues
Revenue on sales of minerals $ 66,841 $ 20,410 $ -- $ -- $ --
------------ ------------ --------- --------- ---------

Operating expenses
Direct operating costs 55,684 15,726 -- -- --
Depreciation and amortization 4,997 3,488 -- 38 --
General and administrative
expenses 4,651 2,286 439 588 759
Share-based compensation 376 615 -- -- --
Accretion expense 1,280 771 -- -- --
Royalty expenses 898 508 -- -- --
Exploration and development 2,117 451 94 116 538
Write-down of deposits -- -- -- 60 185
Write-down and loss on sale
of marketable securities, net -- -- -- -- 70
Nevada mineral property
settlement -- -- -- -- 52

------------ ------------ --------- --------- ---------
Subtotal Operating Expenses 70,003 23,845 533 802 1,604
------------ ------------ --------- --------- ---------
Operating loss (3,162) (3,435) (533) (802) (1,604)


Other income (expense)

Gain on sale of marketable
securities -- -- 73 156 --
Interest income 213 76 6 8 69
Interest expense (544) (991) -- -- --
Foreign exchange gain and other 1,307 1,299 -- -- --
Gain on sale of investment -- -- -- 218 --

Net loss $ (2,186) $ (3,051) $ (454) $ (420) $ (1,535)
Net loss per share, basic and
diluted $ (0.04) $ (0.16) $ (0.54) $ (0.50) $ (1.95)
Weighted average number of
shares outstanding 54,536,679 19,297,668 834,124 832,253 788,217

December 31,

Balance Sheet Data: 2003 2002 2001 2000 1999
Total assets $ 120,610 $ 78,490 $ 112 $ 625 $ 8,699
Working capital (deficit) $ 35,512 $ 13,289 $ (28) $ 441 $ 459
Long-term liabilities $ 24,894 $ 25,755 $ -- $ -- --
Total shareholders' equity
deficit) $ 81,890 $ 41,814 (28) $ 441 $ 8,521

Net loss for the year under
Canadian GAAP (2,186) (3,051) (454) (420) (1,535)
Marketable securities -- -- (54) 54 --
Convertible Debenture -- (20,675) -- -- --
Share-based compensation (1,739) (2,604) -- -- --
Gold hedge loss (3,095) (2,265) -- -- --
Impairment of property, plant
and equipment and change
in depreciation 88 (8,828) -- -- --
Impairment of capitalized
deferred stripping costs
and change in depreciation (87) (5,456) -- -- --
Flow through shares premium
paid in excess of market
value 238 -- -- -- --
Black Fox development costs (3,643) -- -- -- --
------------ ------------ --------- --------- ---------

Net loss for the year under
US GAAP (10,424) (42,879) (508) (366) (1,535)

Comprehensive loss (10,424) (42,879) (508) (366) (1,535)

Net loss per share, basic and
Diluted - US GAAP (0.19) (2.22) (0.61) (0.44) (1.95)



58

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

THIS FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, INCLUDING, WITHOUT LIMITATION,
STATEMENTS REGARDING OUR EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE STRATEGIES
THAT ARE SIGNIFIED BY THE WORDS "EXPECTS", "ANTICIPATES", "INTENDS", "BELIEVES",
OR SIMILAR LANGUAGE. THESE FORWARD-LOOKING STATEMENTS INVOLVE RISKS,
UNCERTAINTIES AND OTHER FACTORS. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN
THIS DOCUMENT ARE BASED ON INFORMATION AVAILABLE TO US ON THE DATE HEREOF AND
SPEAK ONLY AS OF THE DATE HEREOF. THE FACTORS DISCUSSED BELOW UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K ARE AMONG THOSE
FACTORS THAT, IN SOME CASES, HAVE AFFECTED OUR RESULTS AND COULD CAUSE THE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-LOOKING
STATEMENTS.

Overview

The following presents a discussion of the financial condition and results
of operations of the Company for the years ended December 31, 2003, 2002 and
2001. Prior to June 24, 2002, the Company's operations were those of Pursuit, a
public company previously trading on the Toronto Stock Exchange under the ticker
symbol "IPJ." In June 2002, Pursuit entered into a Plan of Arrangement that
resulted in the merger of Pursuit and Nevoro, a privately held corporation and
the parent of AGI, a Delaware corporation.

This Form 10-K should be read in conjunction with our consolidated
financial statements and related notes included in this annual report, as well
as our annual financial statements for the fiscal year ended December 31, 2002
and 2001 included in our Form 10 Registration Statement (the "Registration
Statement") filed with the SEC. Certain classifications have been made to the
prior period financial statements to conform to the current period presentation.
Unless stated otherwise, all dollar amounts are reported as United States
dollars.

In this document unless the context otherwise requires, "we", "our", "us",
the "Company" or "Apollo" mean Apollo Gold Corporation and its subsidiaries.

BACKGROUND AND RECENT DEVELOPMENTS

We are principally engaged in the exploration, development and mining of
gold. We have focused our mining efforts to date on two principal properties:
our Montana Tunnels Mine, owned by one of our subsidiaries, Montana, Inc., and
our Florida Canyon Mine, owned by another one of our subsidiaries, Florida, Inc.
Our development activities involve our Black Fox Property and Standard Mine
project and our exploration activities involve our Pirate Gold, Nugget Field and
Diamond Hill properties as well as our Buffalo Canyon and Willow Creek
properties acquired in 2003.

We are the result of the Plan of Arrangement that resulted in the merger of
Pursuit and Nevoro. Pursuant to the terms of the Plan of Arrangement, Pursuit
acquired Nevoro and continued operations under the name of Apollo Gold
Corporation. Through our wholly-owned subsidiary, AGI acquired by Nevoro in
March 2002, we own the majority of our assets and operate our business. We
continued trading on the Toronto Stock Exchange under our new name, Apollo Gold


59

Corporation, and with a new ticker symbol, APG.U, on July 3, 2002. On August 2,
2002 our ticker symbol changed to APG.

In February 2003, we filed a Registration Statement on Form 10 with the
SEC. The Registration Statement was declared effective on August 13, 2003. On
August 26, 2003, the Company began trading on the American Exchange under the
ticker symbol AGT.

We own and operate the Florida Canyon Mine, a low grade heap leach gold
mine located approximately 42 miles southwest of Winnemucca, Nevada. The
Florida Canyon Mine produces approximately 100,000 ounces of gold annually. In
addition to the mining activities being conducted at the Florida Canyon Mine, we
are continuing a drilling program that is directed at confirmation and expansion
of additional mineralization, and we are conducting a study to determine if
areas in some of the mine walls may be used for additional mining.

We also own and operate the Montana Tunnels Mine, an open pit located near
Helena, Montana. When in full production, the Montana Tunnels Mine has
historically produced approximately 78,000 ounces of gold, 26,000 tons of zinc,
8,700 tons of lead and 1,200,000 ounces of silver annually. The Montana Tunnels
Mine produces approximately 15% of its annual gold production in the form of
dore, an unrefined material consisting of approximately 90% gold, which is then
further refined. The remainder of the mine's production is in the form of
concentrates, one a zinc-gold concentrate and the other a lead-gold concentrate
which are shipped to a smelter. We are paid for the metal content, net of
smelter charges. The Montana Tunnels Mine was idle for approximately four months
in 2002, while we made preparations to begin the removal of waste rock at the
mine. Limited production resumed in October 2002, and full production on the
K-Pit resumed in April 2003. Since that time, the Montana Tunnels Mine has
experienced pit wall problems that have resulted in significant changes to the
mine plan, including an accelerated stripping schedule to remove 10 million tons
of material that slid off the southwest pit wall. In October 2003, a second
waste stripping project ("Phase II") known as the L-Pit project was initiated,
and we intend to pre-strip approximately 17 million tons of waste from the south
and west high walls of the open pit after which the L-Pit should have an
additional 3 to 4 years of mine life.

We have two development stage properties, the Black Fox Property ("Black
Fox"), located near Timmins, Ontario, and the Standard Mine project (including
the new Buffalo Canyon component), owned by our wholly-owned subsidiary Standard
Gold Mining, Inc. located in Nevada. We also have several exploration stage
assets including Willow Creek ("Willow Creek"), Pirate Gold Prospect ("Pirate
Gold") and the Nugget Field Prospect ("Nugget Field"), each located in Nevada
and owned by our wholly-owned subsidiary, Apollo Gold Exploration, Inc. We also
own Diamond Hill Mine ("Diamond Hill"), an exploration asset which is an
unincorporated division of Montana Tunnels Mining, Inc. and located in Montana.

In 2003, we focused our exploration efforts on our Black Fox, Standard Mine
and Buffalo Canyon properties. Black Fox is located east of Timmins, Ontario,
and was acquired in September 2002. We currently anticipate that the
development and commercialization of Black Fox will require three phases. The
first phase commenced in early 2003, and involved a shallow drilling program to
test the open pit potential and core drilling of 297 core holes from 200 to 500
meters in depth. As a result of the core drilling, we have identified proven
and probable reserves at Black Fox.

Upon completion of the first phase, we will then begin the second phase of
our Black Fox project. The second phase will provide for the development of
underground access for further exploratory drilling. We plan to develop an
underground ramp from existing structures. We currently anticipate commencing


60

the second phase of underground drilling in 2004. We also plan to begin the
permitting process for the third phase of the Black Fox project, and anticipate
that this process will require approximately two years, based on a plan for
combined open pit and underground mine, with on-site milling, at a capacity of
1,500 metric tons of ore per day. The third phase would include the construction
of the mine and processing facilities at an aggregate estimated cost of
approximately $45 million.

We have continued drilling at the Standard Mine and drilled approximately
80 holes in 2003. We also acquired Buffalo Canyon in 2003 and completed our
Phase I drilling program in December 2003. Our Buffalo Canyon property is
located immediately south of and contiguous to the Standard Mine. We believe
that the northern portion of Buffalo Canyon has the highest potential for
commercialization, and plan to conduct follow-up drilling in 2004.

APOLLO GOLD CORPORATION

The results of operations of the Company for the year ended December 31,
2002 includes the results of operations of Pursuit for the year ended December
31, 2002, and Nevoro for the period from June 25, 2002 through September 30,
2002.

RESULTS OF OPERATIONS
- -----------------------

YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

Our revenues for the year ended December 31, 2003 were approximately $66.8
million, derived primarily from the sale of 145,935 ounces of gold. This
compares to approximately $20.4 million derived primarily from the sale of
62,699 ounces of gold from June 29, 2002 (Plan of Arrangement date) through the
year ended December 31, 2002. The average price received for gold for the years
ended December 31, 2003 and 2002 was $360 and $326 per ounce, respectively. Our
revenues for silver, zinc and lead for the year ended December 31, 2003 were
$14.31 million, compared to $154,000 during 2002. The growth in revenue in 2003
was due in part to an increase in mining activity in that year and an increase
in the price of gold. For the first six months of 2002, Pursuit was primarily
engaged in seeking joint venture partners for its existing operations and in
negotiating the terms of its acquisition of Nevoro; therefore, mining activity
was minimal during the period. In addition, during the three months ended
December 31, 2002, the mill at the Montana Tunnels Mine was placed on a care and
maintenance basis. The only revenues for this period came from the Florida
Canyon Mine.

Sales of minerals from our Florida Canyon Mine accounted for approximately
54% of our revenues for the year ended December 31, 2003, with the remaining 46%
of revenues derived from sales of minerals from our Montana Tunnels Mine. In
the year ended December 31 2003, we received approximately 79% of our revenue
from sales of gold and 21% from sales of silver, zinc and lead compared to 73%
from the sales of gold and 27% from the sales of silver, zinc and lead for 2002.

Our revenues for 2003 were impacted by mixed performances from our mine
operations. Our primary goal of bringing the Montana Tunnels Mine back into
production was completed during the first quarter of 2003; however, wall
slippage at the mine and problems with our crusher installation limited our gold
production to 55,906 ounces at the Montana Tunnels Mine for 2003. This limited
production still constituted an increase over the 26,657 ounces produced for the
year ended December 31, 2002. In August 2003, we completed the installation of
our new crusher at the Montana Tunnels Mine at a cost of $1.5 million.


61

Once the stripping process is complete, we expect to produce approximately
65,000 ounces of gold per year together with the associated silver, lead, and
zinc by-products.

At Florida Canyon, we produced 101,811 ounces of gold for the year ended
December 31, 2003, as compared to 121,516 ounces of gold for 2002. At December
31, 2003, production was less than anticipated for gold due to lower than
expected ore grades. We currently project production rates of 100,000 to
130,000 ounces of gold in 2004 for Florida Canyon Mine.

We anticipate commencing operations at the Standard Mine in 2005. While the
Standard Mine is owned by a separate wholly owned subsidiary, Standard Gold
Mining, Inc., currently we operate this mine as a satellite of the Florida
Canyon Mine.

Assuming a gold price of approximately $375.00 per ounce, we look forward
to the Montana Tunnels Mine and the Florida Canyon Mine collectively producing
approximately 180,000 ounces of gold in 2004, with output potentially increasing
thereafter after the Standard Mine commences operations in 2005.

Our direct operating costs equaled approximately $55.7 million and $15.8
million for the years ended December 31, 2003 and 2002, respectively. These
amounts include mining and processing costs. The lower direct operating costs
in 2002 reflect the operating cost of AGI from and after June 25, 2002. We
intend to reduce our direct operating costs in 2004, focusing on cost reductions
at our mines. As of December 31, 2003, our scheduled commitments include only
our operating leases, with minimum lease payments of $160,000 in 2004. We
incurred depreciation and amortization expenses of approximately $5.0 million
for the year ended December 31, 2003, as compared to $3.5 million for 2002. The
difference is due to Pursuit's limited operations in 2002, focusing upon the
Nevoro acquisition for the first six months of that year.

We incurred approximately $4.7 million and $2.3 million in general and
administrative expenses for the years ended December 31, 2003 and 2002,
respectively. General and administrative expenses for the year ended December
31, 2003 consisted of increased legal and accounting expenses incurred in the
preparation of registration statements and private placement documentation for
our common stock and increased investor relations costs, including exchange
listing fees. In 2002, general and administrative expenses consisted primarily
of legal and accounting expenses relating to the Plan of Arrangement, salaries
and accounting expenses for maintaining Pursuit as a publicly traded company in
Canada for the first six months of the year, organization costs and maintenance
of a Denver corporate office (approximately $2.3 million).

In the year ended December 31, 2003, we also incurred share-based
compensation of approximately $376,000, resulting from the issuance of stock in
lieu of certain cash compensation. We do not currently intend to continue to use
share-based compensation in the foreseeable future.

In the years ended December 31, 2003 and 2002, we accrued accretion expense
of approximately $1.3 million and $771,000, respectively, relating to accrued
site closure costs at our Florida Canyon Mine and Montana Tunnels Mines. This
expense represents our estimation of the fair value of the increase in our site
closure and reclamation costs. We incurred $898,000 in royalty expenses for the
year ended December 31, 2003, as compared to $508,000 during 2002. These
amounts are attributable to royalties on production from our Florida Canyon
Mine.


62

Our expenses for exploration and development, consisting of drilling and
related expenses at our exploration properties, totaled approximately $2.1
million and $451,000 for the years ended December 31, 2003 and 2002,
respectively. Given that Pursuit was focused upon the Nevoro acquisition in the
first six months of 2002, it did not incur exploration or development costs
during that period.

As a result of these expense components, our operating expenses totaled
approximately $70 million for the year ended December 31, 2003, as compared to
approximately $23.9 million for 2002. The difference is the result that Pursuit
had limited operations in 2002 and was focused upon the Nevoro acquisition for
the first six months of 2002.

We realized interest income of approximately $213,000 during the year ended
December 31, 2003. We incurred interest expense of approximately $544,000 in
the year ended December 31, 2003, primarily for equipment leases and bridge
loans. We realized interest income of approximately $76,000 in the year ended
December 31, 2003 and incurred net interest expense of approximately $991,000
during 2002.

We realized foreign exchange gains of approximately $1.3 million during
each of the years ended December 31, 2003 and 2002, from cash balances not held
in United States dollars.

Based on these factors, we incurred a loss of approximately $2.2 million,
or $0.04 per share, for the year ended December 31, 2003, as compared to a loss
of approximately $3.1 million, or $0.16 per share, for the year ended December
31, 2002.

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

We realized total revenue of approximately $20.4 million in the year ended
December 31, 2002. We did not realize any revenue in the year ended December
31, 2001, as Pursuit was primarily engaged during that period in seeking joint
venture partners for its existing operations. All of our revenue for 2002 was
derived from sales of minerals. In addition, all of our revenue for 2002 was
derived from the operations at our Florida Canyon Mine.

Our direct operating costs equaled approximately $15.7 million for the year
ended December 31, 2002, and included mining and processing costs. We realized
depreciation and amortization expenses of approximately $3.5 million for the
year ended December 31, 2002. We incurred $508,000 in royalty expenses for the
year ended December 31, 2002, attributed to royalties on production from our
Florida Canyon Mine. As Pursuit was not actively operating mines during the
year ended December 31, 2001, we did not incur any mining or processing costs
for that period.

We incurred approximately $2.3 million in general and administrative
expenses for the year ended December 31, 2002, as compared to $439,000 in
general and administrative expenses for the year ended December 31, 2001.
General and administrative expenses in 2002 consisted of salaries and benefits
for management as well as legal and accounting fees attributed to our June 2002
Plan of Arrangement. In 2001, these expenses consisted primarily of salaries
and legal and accounting fees for maintaining Pursuit as a publicly traded
company in Canada. In the year ended December 31, 2002, we also incurred
share-based compensation of $615,000, resulting from the issuance of shares in
lieu of certain cash compensation.

In the year ended December 31, 2002, we accrued accretion expense of
approximately $771,000, relating to accrued site closure costs of our Florida


63

Canyon and Montana Tunnels mines. Our expenses for exploration and development
totaled approximately $451,000 for the year ended December 31, 2002, compared to
$94,000 for the year ended December 31, 2001. The 2002 exploration and
development expenses consisted of drilling and related expenses. In 2001, these
expenses consisted of miscellaneous land holding fees.

As a result of these expense components, our operating expenses for the
year ended December 31, 2002 equaled approximately $23.8 million, compared to
operating expenses of $533,000 for 2001.

We incurred interest expense of approximately $1 million during the year
ended December 31, 2002 for equipment leases and bridge loan financings. We did
not incur interest expense during the year ended December 31, 2001, but realized
interest income of $6,000. For the year ended December 31, 2001, we realized
$73,000 as a gain on the sale of marketable securities purchased, and sold by
Pursuit to fund its exploration activities.

Based on these factors, we incurred a loss of approximately $3.4 million,
or $0.16 per share, for the year ended December 31, 2002 as compared to a loss
of $454,000, or $0.54 per share, for the year ended December 31, 2001.

FINANCIAL CONDITION AND LIQUIDITY
- ------------------------------------

To date, we have funded our operations primarily through issuances of debt
and equity securities and cash flow from operations. At December 31, 2003, we
had cash and cash equivalents of approximately $25.9 million and short-term
investments of approximately $5.9 million, compared to cash and cash equivalents
of approximately $8.4 million at December 31, 2002. We had no short-term
investments at December 31, 2002.

The increase in cash from December 31, 2002 is primarily due to increases
in net cash from operations and financing activities in 2003. In the year ended
December 31, 2003, we had positive cash flow of approximately $5.6 million from
operating activities, compared to positive cash flow from operating activities
of approximately $617,000 in the year ended December 31, 2002. The positive
cash flow in 2003 was comprised of approximately $5.0 million from depreciation
and amortization, approximately $1.7 million from the amortization of deferred
stripping, approximately $1.3 million in accretion expense and approximately
$376,000 from share-based compensation, offset primarily by negative cash flow
of approximately $339,000 from the sale of property, plant and equipment, and an
approximately $168,000 net change in non-cash operating working capital (an
increase in accounts receivable, accounts payable, prepaid expenses, accrued
liabilities, property and mining lease payable and broken ore on leach pad,
offset by a decrease in inventories). In 2002, our positive cash flow from
operating activities was comprised of approximately $3.5 million in depreciation
and amortization, approximately $771,000 from accretion expense and
approximately $615,000 from the use of share-based compensation, offset by
approximately $1.2 million net change in non-cash operating working capital
items.

In the year ended December 31, 2003, we had positive cash flow of
approximately $39.2 million from financing activities, compared to positive cash
flow of approximately $37.4 million from financing activities in 2002. The
positive cash flow in 2003 from operating activities was comprised of
approximately $37.7 million received from the issuance of shares, approximately
$3.9 million from the exercise of warrants and options and approximately $1.3
million from notes payable, offset by payments of notes payable of approximately
$3.7 million. In 2002, our positive cash flow from financing activities was
comprised of proceeds of approximately $20.8 million (net) from the issuance of
convertible debentures, approximately $14.6 million from the issuance of special
warrants, approximately $2.9 million from the issuance of flow-through common
shares and approximately $1.8 million from proceeds from notes payable, offset
by approximately $2.6 million from the payment of notes payable.

In the year ended December 31, 2003, we expended net cash of approximately
$27.3 million on investing activities, as compared to approximately $29.7
million of net cash expended in the year ended December 31, 2002. The
expenditures in 2003 consisted of approximately $11.5 million for property,
plant and development drilling and mining and processing equipment,
approximately $7.1 million in deferred stripping costs as well as approximately
$13 million for other capital expenditures for our Montana Tunnels Mine,
approximately $5.9 million in short-term investments and approximately $1.6
million for restricted certificates of deposit, representing cash placed in
trust as security for our site closure obligations to the States of Montana and
Nevada. These expenditures were offset by approximately $339,000 received from
the disposal of property, plant and equipment. In 2002, our investment
expenditures consisted of approximately $12.1 million for deferred stripping
costs at Montana Tunnels, approximately $11.1 million for the acquisition of
Nevoro, approximately $2.9 million for property, plant and equipment
expenditures, approximately $2.0 million for the acquisition of our Black Fox
Property, and approximately $1.6 million for the above-referenced restricted
certificates of deposit. We did not receive any proceeds from investment in
2002.

In June 2003, we entered into a $5,000,000 Revolving Loan, Guaranty and
Security Agreement with Standard Bank London Limited ("Standard Bank"). Although
there is a $5,000,000 commitment, we must satisfy certain liquidity and current
ratio requirements in order for Standard Bank to advance the maximum amount of
the loan. Until the commitment under the line of credit expires or has been
terminated, we have to meet certain covenants. We have borrowed approximately
$0.8 million from Standard Bank and subsequently repaid that amount. This
revolving loan guarantee is collateralized by the assets and cash flows of our
Florida Canyon Mine. Our ability to borrow is calculated on a quarterly basis
determined by current ore reserves, price of gold and outstanding loan balances.

Our Montana Tunnels Mine has experienced pit wall problems over the past
year that will continue to require funding of an additional $15 million over the
next year for waste removal.

We believe our cash requirements for 2004 will be funded through a
combination of current cash, future cash flows from operations, and/or future
debt or equity security issuances. On September 26, 2003, we closed funding of
approximately Cdn$50 million from an offering of common shares in each of the
provinces in Canada (excluding Quebec) and certain other foreign jurisdictions


64

and a private placement of common shares in the United States. BMO Nesbitt Burns
Inc, Canaccord Capital Corporation, Griffiths McBurney & Partners, Orion
Securities Inc., and Westwind Partners Inc. were retained as agents in
connection with these transactions and received a fee of 6% of the gross
proceeds thereof. These agents were also granted a non-transferable warrant to
acquire such number of common shares as is equal to 3% of the total number of
commons shares purchased in these transactions. These warrants are exercisable
at any time prior to September 26, 2005. The offering in Canada and certain
other foreign jurisdictions were made by way of an offering prospectus filed in
Canada in the province of Ontario. The U.S. private placement was made in the
U.S. in reliance upon the exemption from registration provided in Section 4(2)
of the United States Securities Act of 1933, as amended, and/or Rule 506 of
Regulation D promulgated thereunder.

Our ability to raise capital is highly dependent upon the commercial
viability of our projects and the associated prices of the metals we produce.
Because of the significant impact that changes in the prices of silver, gold,
lead 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 expenditures 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.

All of our operations are subject to reclamation and closure requirements.
We have obtained bonds to provide coverage for reclamation, severance and
closure liabilities at our Florida Canyon and Montana Tunnels Mines. Florida,
Inc. is the principal under two reclamation bonds totaling $17,456,130 issued by
Safeco. One of those bonds, in the amount of $16,936,130, was the subject of
litigation (See "Legal Proceedings"); however, upon resolution of the
litigation, the bond is treated as being outstanding for purposes of meeting our
Florida Canyon Mine's bonding requirements. We maintain a second Safeco bond, in
the amount of $520,000 having an expiration date of May 1, 2004, through payment
of an annual fee of $6,500. We also have obtained a reclamation bond in the
amount of $14,987,688 from CNA for our Montana Tunnels Mine. That bond is the
subject of a Term Bonding Agreement dated as of August 1, 2002. Under that
Agreement, (i) CNA is committed to furnish the bond for a 15-year term, ending
on July 31, 2017; (ii) Montana Tunnels Mining, Inc. ("Montana, Inc.") will
deposit $75,000 per month (to be adjusted periodically according to our sales
price of gold) into a collateral trust account until the balance in the trust
account is equal to the penal sum of the bond; (iii) we have guaranteed Montana,
Inc.'s obligations under the Agreement; (iv) payment of premium is deferred
until the balance in the collateral trust account is equal to the penal sum of
the bond; and (v) Montana, Inc. may terminate the Agreement at any time by
obtaining release of the bond through posting a substitute bond.

Operating Activities. Operating activities provided approximately $5.6
million of cash during the year ended December 31, 2003. Operating activities
provided approximately $617,000 of cash during the twelve months ended December
31, 2002. The difference in cash is primarily due to a lower level of operating
activities in 2002, as Pursuit was focused on seeking joint venture partners in
the first six months of that year.

Florida Canyon Mine

For our Florida Canyon Mine, we expect to have gold production of
approximately 106,000 ounces in 2004. In addition, we expect to have operating
cash flow of approximately $10 million and capital expenditures of approximately
$8 million in 2004.


65

Montana Tunnels Mine

For our Montana Tunnels Mine we hope to have gold production of
approximately 60,000 ounces in 2004. In addition, we expect to have operating
cash flow of approximately $8 million and capital expenditures of approximately
$15 million in 2004.

Black Fox Project

Black Fox is expected to commence commercial production in the fourth
quarter of 2006 or first half of 2007. We expect to incur capital expenditures
of $10 million in 2004.

Investing Activities. Investing activities utilized approximately $27.3
million of cash during the year ended December 31, 2003. The major uses of cash
were for property, plant and equipment (approximately $11.5 million), additions
to deferred stripping costs (approximately $8.7 million), short term investments
(approximately $5.9 million) and for the investment in a restricted certificate
of deposit (approximately $1.6 million). Investing activities used
approximately $29.7 million of cash during the year ended December 31, 2002. In
2002, the major uses of cash were for a loan to Nevoro to acquire AGI
(approximately $11.1 million), additions to deferred stripping costs
(approximately $12.1 million), property, plant and equipment (approximately $2.9
million), Black Fox acquisition (approximately $2.0 million) and for the
investment in a restricted certificate of deposit (approximately $1.6 million).

Financing Activities. During the year ended December 31, 2003, financing
activities provided approximately $39.2 million in cash, primarily from proceeds
of approximately $37.7 million from our September private placement,
approximately $3.9 million from the exercise of warrants and options in 2003,
and proceeds of notes payable of approximately $1.3 million. Financing
activities provided approximately $37.4 million in cash during the year ended
December 31, 2002, primarily from proceeds of issuance of convertible debentures
of approximately $20.8 million as a result of our merger with Nevoro,
approximately $14.6 million from the exercise of special warrants issued in our
merger with Nevoro, and proceeds of notes payable of approximately $1.8 million.


66

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

During the fiscal year ended December 31, 2003, the Company had no
off-balance sheet arrangements. The following table sets forth our contractual
obligations and commitments at December 31, 2003 in connection with our
long-term liabilities:



Contractual Obligations 2004 2005 2006 2007 2008 Total
- ------------------------------- ----- ----- ---- ---- ---- -----


Notes payable (1) 4,117 2,650 625 0 0 7,392
Capital lease obligations (2) 0 0 0 0 0 0
Operating lease obligations (3) 160 86 77 75 25 423
----- ----- ---- ---- ---- -----
Total 4,277 2,736 702 75 26 7,815


(1) The notes payable are secured by a fixed charge on certain machinery and
equipment and bear interest at various rates between 3.615% and 7.5%.
(2) The capital lease obligations are included in notes payable.
(3) Operating lease obligations relate to covers on rail cars, office premises,
and equipment.
(4) This table does not include the Company's employment agreement obligations.


ENVIRONMENTAL

All of our operations are subject to reclamation and closure requirements.
We monitor these costs on a regular basis, and together with third party
engineers we prepare internal estimates to evaluate our bonding requirements.
These estimates are then reconciled with requirements of state and federal
authorities. As of December 31, 2003, we have accrued approximately $21.6
million related to reclamation, severance and other closure requirements. As of
December 31, 2003, our total reclamation, severance and other closure
requirements are estimated to be $38.7 million. This liability is covered by a
combination of surety bonds, totaling $31.8 million and cash bonds totaling $6.9
million, for a total reclamation surety at December 31, 2003, of approximately
$38.7 million. Our reclamation liability coverage exceeds our estimated
requirements because the federal and state authorities estimate reclamation
based upon wages in excess of what we would have to pay if we are required to
conduct the reclamation and closure requirements on our own; however, the
federal and state authorities assume we will not have the capability to complete
the reclamation and closure requirements on our own. Therefore, liability
coverage is increased to account for the increased overhead and other costs
necessary for mobilization and demobilization of workers, time delays and
numerous other contingencies if the state or federal authorities were forced to
conduct the reclamation project. We have accrued what management believes is the
present value of our best estimate of the liability as of December 31, 2003;
however, it is possible that our obligation may change in the near or long term
depending on a number of factors, including finalization of settlement terms,
ruling from the courts and other factors. In addition, any adverse ruling
against us regarding any environmental matter could have a material adverse
effect on us.

Each of our mines operates under a permit granted by the state in which
each mine is located. Mining operations are usually governed by applicable
state environmental policies which are usually regulated by statute. For
instance, in Montana, the Montana Department of Environmental Quality
administers the majority of permits under which our mine operates.

We strive to conduct our operations in an environmentally responsible
manner by, among other things, implementing sound work methods, completing
concurrent reclamation (where practicable), handling materials carefully and
monitoring wildlife.

All aspects of our mining operations are regulated by operating permits.
Applications are submitted to appropriate regulating agencies to obtain new
authorizations, make changes to the existing plan of operations or to renew
permits on a periodic schedule. Applications submitted for operating permits
are reviewed by the appropriate regulatory agencies with occasional third party
review of complex issues. Regulatory agencies can, and do, request additional


67

explanations or information in the review process before granting a permit. All
permits contain compliance measures and require periodic monitoring and
reporting to regulating agencies and routine inspections are conducted by
permitting agencies.

Geochemical breakdown of ores or waste rock, water quality and stability of
constructed structures are the areas that receive the most attention for
environmental concern at mines. The characteristics of our mine ores and waste
rock show good chemical stability. We have conducted tests at our mines that
support our belief that adverse chemical breakdown should not occur and the
potential for acid rock drainage is low. Consequently, water quality issues are
minimized as a result of the favorable characteristics of the mine rock. Several
studies, models and reports have been provided to the permitting agencies to
assess our environmental risks at our mines.

Our mines use minimal amounts of regulated toxic substances in the mining
and milling operations. Most of the chemicals we use to collect the minerals
are not regulated as toxic substances. Standard fuels and oils are used in our
mining operations and used oils and coolants are marketed or recycled. There
are no regulated cleaning solvents used at our mines. The milling operations
use a small amount of sodium cyanide as an inhibitor in the flotation recovery
process. We also use a cyanide compound that becomes complexed with metals or
is degraded by bacteria and sunlight in the tailings water rendering any
residual cyanide harmless. Our milling operations recover and reuse all of the
process water from the tailings impoundment recovery system with fresh water
makeup added as necessary. There is no water discharge to the environment from
the mining or milling operations. All storm water at our mines is captured
either in the open pit mine or in the tailings impoundment or in fresh water
makeup ponds and is subsequently used for makeup water in the milling process.

Reclaiming areas that have been disturbed by mining activity to produce
original or natural conditions is the focus of our operating permit. Our mines
maintain a closure plan with associated costs to complete final reclamation at
the property following the cessation of mining operations. Waste rock dumps and
some other disturbance areas are reclaimed concurrent with active mining
operations. The tailings impoundment open pit mine and mine facilities will be
reclaimed after mining and milling operations have been completed.

Following mining and milling operations, our mines will be closed and
reclaimed to former or new beneficial use criteria in accordance with their
respective mine operating permit and reclamation plan. Each mine's closure plan
details the tasks and schedules that will be required to reclaim the different
areas of the mines. We intend that all mine closure plans will be consistent
with requirements in our operating permits.

In the past several years, there have been corporate level environmental
audits and third party audits. The audits are comprehensive and include review
of the environmental aspects of the mining operations. Individual areas of the
operation have also been reviewed by third party consultants. Geotechnical
requirements such as construction of the tailings embankment and stability or
hydrogeology analyses at the mine are conducted by qualified consultants who do
extensive studies, designs, construction oversight and reports on these projects
for us and the applicable regulatory agencies.

We try to conduct our operations in an environmentally responsible manner.
Since our merger no notices of violation have been received from any
environmental regulatory agency.


68

Generally, our mines are a significant part of the tax base of the
community and our mines are usually strongly supported by the community's
residents and schools. There have been no community protests against our mines
during their period of operations.

DIFFERENCES BETWEEN CANADIAN AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The Company reports under Canadian Generally Accepted Accounting Principles
("Canadian GAAP") and reconciles to U.S. Generally Accepted Accounting
Principles ("US GAAP"). The application of US GAAP has a significant effect on
the net loss and the net loss per share. For a detailed explanation of the
difference between Canadian and U.S. Generally Accepted Principles see Note 18
of the Company's financial statements.

NEW ACCOUNTING PRONOUNCEMENTS

We report under Canadian GAAP and reconcile the financial statements to US
GAAP. For a detailed explanation of New Canadian and U.S. Accounting
Pronouncements see Note 18(k) of the Company's financial statements.

CRITICAL ACCOUNTING 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 (i) the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and (ii) the reported amounts of revenues and
expenses during the reporting periods covered by the financial statements.

Our management routinely makes judgments and estimates about the effect of
matters that are inherently uncertain. As the number of variables and
assumptions affecting the future resolution of the uncertainties increase, these
judgments become even more subjective and complex. We have identified certain
accounting policies that are most important to the portrayal of our current
financial condition and results of operations. Our significant accounting
policies are disclosed in Note 2 to the Consolidated Financial Statements
included in this Annual Report on Form 10-K.

REVENUE RECOGNITION

Sales of metals products sold directly to smelters are recorded when title
and risk of loss transfer to the smelter at current spot metals prices. We must
estimate the price at which our metals will be sold in reporting our
profitability and cash flow. Recorded values are adjusted monthly until final
settlement at month-end metals prices. Sales of metal in products tolled, rather
than sold to smelters, are recorded at contractual amounts when title and risk
of loss transfer to the buyer.

DEFERRED STRIPPING COSTS

In general, mining costs are charged to cost of sales as incurred.
However, certain mining costs associated with open-pit deposits that have
diverse grades and waste-to-ore ton ratios over the mine life are deferred and
amortized. These mining costs are incurred on mining activities that are
normally associated with the removal of waste rock at open-pit mines and which
is commonly referred to as "deferred stripping." Amortization of amounts


69

deferred is based on a stripping ratio, calculated as estimated total waste
mining costs divided by the current proven and probable reserves and mineral
resources expected to be converted into mineral reserves (under US GAAP, only
proven and probable resources are used). This ratio is used to calculate the
current period production cost charged against earnings by multiplying the
stripping ratio times the reserves mined during the period. The application of
the accounting for deferred stripping costs and the resulting differences in
timing between costs capitalized and amortization generally results in an asset
on the balance sheet (capitalized mining costs), although it is possible that a
liability could arise if amortization exceeds costs capitalized.

The amortization of these capitalized costs is reflected in the income
statement in a pro-rata manner over the remaining life of the open-pit mine
operations so that no unamortized balance remains at mine closure. Deferred
stripping costs are included with related mining property, plant and equipment
for impairment testing purposes.

DEPRECIATION AND DEPLETION

Depreciation is based on the estimated useful lives of the assets and is
computed using straight-line and unit-of-production methods. Depletion is
computed using the unit-of-production method. The units-of-production method
under Canadian GAAP is based on proven and probable ore reserves and a portion
of resources expected to be converted to reserves based on past results. As
discussed above, our estimates of proven and probable ore reserves and resources
may change, possibly in the near term, resulting in changes to depreciation,
depletion, amortization and reclamation accrual rates in future reporting
periods.

IMPAIRMENT OF LONG-LIVED ASSETS

We review the net carrying value of all facilities, including idle
facilities, on a periodic basis. We estimate the net realizable value of each
property based on the estimated undiscounted future cash flows that will be
generated from operations at each property, the estimated salvage value of the
surface plant and equipment and the value associated with property interests.
These estimates of undiscounted future cash flows are dependent upon the
estimates of metal to be recovered from proven and probable ore reserves and
mineral resources expected to be converted into mineral reserves (see discussion
above), future production cost estimates and future metals price estimates over
the estimated remaining mine life. If undiscounted cash flows are less than the
carrying value of a property, an impairment loss is recognized based upon the
estimated expected future cash flows from the property discounted at an interest
rate commensurate with the risk involved.

ENVIRONMENTAL MATTERS

When it is probable that such costs will be incurred and they are
reasonably estimable, we accrue costs associated with environmental remediation
obligations at the most likely estimate. Accruals for estimated losses from
environmental remediation obligations generally are recognized no later than
completion of the remedial feasibility study for such facility and are charged
to provisions for closed operations and environmental matters. We periodically
review our accrued liabilities for such remediation costs as evidence becomes
available indicating that our remediation liability has potentially changed.
Costs of future expenditures for environmental remediation are not discounted to
their present value unless subject to a contractually obligated fixed payment
schedule. Such costs are based on our current estimate of amounts that are
expected to be incurred when the remediation work is performed within current


70

laws and regulations. Recoveries of environmental remediation costs from other
parties are recorded as assets when their receipt is deemed probable.

BROKEN ORE ON LEACH PAD

Mining, engineering and crushing related costs are charged to the broken
ore on leach pad account and matched to the ounces added and removed. The gold
ounces are shipped to the refinery and revenues are recorded, in accordance with
our revenue recognition policy, and matched in the current period against the
costs.

When the ore is delivered to the leach pad it is sprinkled with a dilute
solution containing cyanide and lime. This solution seeps through the leach
pile until it reaches the plastic liner at the bottom. This process is aided by
drainage systems (pipes and trenches) throughout the leach pad. From the liner
the gold bearing solution is captured in a pond and pumped to a series of tanks
containing granular activated carbon, where the gold is absorbed onto the
carbon's porous surfaces. Removal of carbon from the tanks facilitates the
stripping or removal of gold from the carbon surfaces. The solution used in the
stripping process is then passed through an electrical plating (electro-winning)
circuit where the gold is deposited on electrodes. The electro-winning process
is a method of using positive and negative electricity to extract the metals
from the solutions. This process creates a sludge material that is then refined
into a dore product at the mine site. Dore is a metal bar that consists of
50-65% gold, 10-20% silver and various levels of other metals that may occur in
the ore. An additional refining process occurs offsite in which the bar is
converted into marketable or .9999 fine gold and .9000 fine silver.

Our drawdown calculations for current and long term asset valuation
determination suggest that it will take approximately 18 months to deplete the
leach pad inventory. For production purposes, because we continually add new
production ounces, we use a five-month period in which we determine that 20% of
any given production will be taken off of the pad in a months' time.

The leach pad valuation process is based on management's best estimates.
When the leach pad is finally closed and all gold and silver ounces removed are
counted we will be able to determine the actual quantity of metal that was
contained in the leach pad. Estimates begin at the start of the process as tons
and metal content are estimated. Tonnage is estimated using ground surveys and
truck counts. Metal content is calculated using fire assaying techniques that
involve averaging the mining areas and comparing to the daily blast hole assays
that are done using the Atomic Absorption Hot Cyanide Leach assaying techniques.
The gold recovery curve is then estimated using the design of the leach pad, the
composition of run of mine and crushed ores, the estimated ore grades and the
drawdown timing. All calculations are based on mining rules and processes,
however, only the total amounts of metals removed from the pad is truly known at
any given time. The ounces removed from the pad are measured and used as a
check and balance to the integrity of the calculation to ensure that we are
reasonably assured that our estimates are close. The leach pad inventories at
Florida Canyon are built and processed in stages and accordingly at the close of
any given portion or stage of the process it is possible to assess the
effectiveness of all assumptions by comparing them to what actually occurred.
The mine has been in production since 1986 and all historical records are used
for comparative purposes.

Based on this historical information, it is expected that we will recover
approximately 73% of all gold ounces crushed and delivered to the pad. Our
expected recovery for run of mine or uncrushed ounces delivered to the pad is
58% for the life of the leach pad. However these are estimates based on


71

historical data and the ultimate recovery rate will only be known at the end of
the leach pad life cycle.

With the current mine plan at the Florida Canyon operation, the current
leach pad operation is expected to deliver 338,000 ounces through 2008.

Changes in our assumptions will or could have the effect of changing the
value of the broken ore on the leach pad. Circumstances that may lead to
changes in our assumptions include but are not limited to the following: as the
ore grades fluctuate the recovery assumptions may change, the higher the ore
grade the higher the recovery is on those ounces, the weather may affect the
leaching of the ores on the pads such as a strong freeze may slow down
recoveries and a very wet spring may speed up the recovery of ounces.

The most critical area that could affect the leach pad process would be the
make up of the actual ore bearing material. For example, sulfide or
carbonaceous bearing ores are harder to leach than pure oxide ores. Other
minerals or chemical compounds may also affect the leachability of the ores on
the pad.

As of March 1, 2004, there is an estimated 58,457 ounces of gold in the
broken ore on leach pad with a carrying value of $11.42 million or $195.38 per
ounce of gold. Each 1% change in the estimated recovery rate is 634 ounces of
gold. If the recovery is estimated to be lower than expected this is a permanent
loss of gold ounces and if the recovery is estimated to be higher the reverse is
true. Each 1% change in this estimate will change the broken ore on leach pad by
$123,870.


72

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK

Market Price of Gold

The Company's earnings and cash flow are significantly impacted by changes
in the market price of gold. Gold prices can fluctuate widely and are affected
by numerous factors over which we have no control, such as demand, production
levels, economic policies of central banks, producer hedging, and the strength
of the U.S. dollar relative to other currencies. During the last six years, the
average annual market price has fluctuated between $271 per ounce and $417 per
ounce. A 10% decrease in the price of gold would have reduced our 2003 revenue
by $5.25 million.

In the past, we have not used hedging techniques to reduce our exposure to
price volatility; however, on November 15, 2002, we entered into a hedging
contract with the Standard Bank London Limited ("Standard Bank") for gold in the
aggregate amount of 100,000 ounces involving the use of put and call options.
Beginning in April 2003, we are obligated to deliver 4,000 ounces of gold per
month, for 25 months, under the following conditions: We purchased put options
to cover the floor price of gold at $295 per ounce. Therefore, if the price of
gold decreases to a level below $295 per ounce, Standard Bank is obligated to
purchase the 4,000 ounces for $295 per ounce. We also sold call options to
Standard Bank. Therefore, if the price of gold increases to over $345 per
ounce, then we must sell 4,000 ounces to Standard Bank, thereby leaving any
excess of the $345 ceiling for standard Bank. As at March 15, 2004, there are
72,280 ounces remaining on these options. We have engaged in hedging activities
to satisfy the covenants of the Standard Bank line of credit agreement. As a
result, we may be prevented from realizing possible revenues in the event that
the market price of a metal exceeds the price stated in a forward sale or call
option contract.

There are certain market risks associated with the hedging contracts
utilized by the Company. If the Company's counterparties fail to honor their
contractual obligation to purchase gold at agreed-upon prices, the Company may
be exposed to market price risk by having to sell gold in the open market at
prevailing prices. Similarly, if the Company fails to produce sufficient
quantities of gold to meet its forward commitments, the Company would have to
purchase the shortfall in the open market at prevailing prices. At December 31,
2003 and 2002, the fair value of the contracts is a loss of $5,911,000, and
$2,265,000, respectively.

Our senior management, with approval of our Board of Directors, makes all
decisions regarding our hedging techniques, and we have no formal corporate
policy concerning such techniques. We have no current plans to use gold hedging
techniques in the future.

Interest Rate Risk

At March 15, 2004, we have no outstanding balance owed under our line of
credit with Standard Bank. If we utilize the line of credit, each loan under the
line of credit would bear interest during each interest period for such loan at
a rate per annum equal to the LIBOR Rate for such interest period plus 2.75%.


73

Foreign Currency

While the Company currently conducts exploration activities in Canada, the
price of gold is denominated in U.S. dollars, and the Company's gold production
operations are in the United States. Therefore, the Company has minimal, if any
foreign currency exposure.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Apollo Gold Corporation

Independent Auditors Reports F-2

Consolidated Balance Sheets at December 31, 2003 and December 31, 2002 F-3

Consolidated Statements of Operations and Deficit for the years ended
December 31, 2003, 2002 and 2001 F-4

Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002 and 2001 F-5

Notes to the Consolidated Financial Statement F-6


74




Auditors' Report and Consolidated Financial Statements of


APOLLO GOLD CORPORATION


December 31, 2003, 2002 and 2001






INDEPENDENT AUDITORS' REPORT

To the Shareholders of
Apollo Gold Corporation

We have audited the consolidated balance sheets of Apollo Gold Corporation as at
December 31, 2003 and 2002 and the consolidated statements of operations and
deficit and cash flows for each of the years in the three-year period ended
December 31, 2003. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with Canadian generally accepted auditing
standards and auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2003
and 2002 and the results of its operations and cash flows for each of the years
in the three-year period ended December 31, 2003 in accordance with Canadian
generally accepted accounting principles.



Chartered Accountants
Vancouver, British Columbia
March 5, 2004


================================================================================
F-2



APOLLO GOLD CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF UNITED STATES DOLLARS)
================================================================

December 31,
--------------------
2003 2002
--------- ---------

ASSETS
CURRENT
Cash and cash equivalents $ 25,851 $ 8,426
Short-term investments 5,855 -
Accounts receivable 4,647 3,228
Prepaids 552 532
Broken ore on leach pad 9,594 9,098
Inventories (Note 4) 2,839 2,926
- ----------------------------------------------------------------
49,338 24,210
BROKEN ORE ON LEACH PAD - LONG-TERM 1,827 1,605
PROPERTY, PLANT AND EQUIPMENT (Note 5) 38,519 30,375
DEFERRED STRIPPING COSTS 24,033 16,998
RESTRICTED CERTIFICATE OF DEPOSIT (Note 6) 6,893 5,302
- ----------------------------------------------------------------
$120,610 $ 78,490
================================================================

LIABILITIES

CURRENT
Accounts payable $ 5,848 $ 4,935
Accrued liabilities 2,781 1,961
Notes payable (Note 7) 4,117 3,114
Property and mining taxes payable 1,080 911
- ----------------------------------------------------------------
13,826 10,921
NOTES PAYABLE (Note 7) 3,275 5,247
ACCRUED SITE CLOSURE COSTS (Note 9) 21,619 20,508
- ----------------------------------------------------------------
38,720 36,676
- ----------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' EQUITY
Share capital (Note 10) 120,624 72,206
Issuable common shares (Note 10) 231 231
Special warrants (Note 10) - 6,305
Contributed surplus (Note 10) 7,172 7,023
Deficit (46,137) (43,951)
- ----------------------------------------------------------------
81,890 41,814
- ----------------------------------------------------------------
$120,610 $ 78,490
================================================================


APPROVED ON BEHALF OF THE BOARD

- ----------------------------------
G.W. Thompson, Director


- ----------------------------------
Robert Watts, Director


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


================================================================================
F-3



APOLLO GOLD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT FOR SHARE AMOUNTS)
===============================================================================

Year ended December 31,
-------------------------------------
2003 2002 2001
------------ ------------ ---------

REVENUE
Revenue from sale of minerals $ 66,841 $ 20,410 $ -
- -------------------------------------------------------------------------------

OPERATING EXPENSES
Direct operating costs 55,684 15,726 -
Depreciation and amortization 4,997 3,488 -
General and administrative expenses 4,651 2,286 439
Share-based compensation 376 615 -
Accretion expense 1,280 771 -
Royalty expenses 898 508 -
Exploration and business development 2,117 451 94
- -------------------------------------------------------------------------------
70,003 23,845 533
- -------------------------------------------------------------------------------
OPERATING LOSS (3,162) (3,435) (533)
OTHER INCOME (EXPENSES)
Gain on sale of marketable securities - - 73
Interest income 213 76 6
Interest expense (544) (991) -
Foreign exchange gain and other 1,307 1,299 -
- -------------------------------------------------------------------------------
NET LOSS FOR THE YEAR (2,186) (3,051) (454)
DEFICIT, BEGINNING OF YEAR (43,951) (40,900) (40,446)
- -------------------------------------------------------------------------------
DEFICIT, END OF YEAR $ (46,137) $ (43,951) $(40,900)
===============================================================================

NET LOSS PER SHARE, BASIC
AND DILUTED $ (0.04) $ (0.16) $ (0.54)
===============================================================================

WEIGHTED-AVERAGE NUMBER OF
SHARES OUTSTANDING 54,536,679 19,297,668 834,124
===============================================================================



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


================================================================================
F-4



APOLLO GOLD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF UNITED STATES DOLLARS)
================================================================================================

Year ended December 31,
----------------------------
2003 2002 2001
--------- --------- ------

OPERATING ACTIVITIES
Net loss for the year $ (2,186) $ (3,051) $(454)
Items not affecting cash:
Depreciation and amortization 4,997 3,488 -
Amortization of deferred stripping 1,699 - -
Share-based compensation 376 615 -
Accretion expense 1,280 771 -
Gain on sale of property, plant and equipment (339) - -
Gain on sale of marketable securities - - (73)
Other (56) - -
Net change in non-cash operating working capital items (Note 15) (168) (1,206) (33)
- ------------------------------------------------------------------------------------------------
5,603 617 (560)
- ------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES
Property, plant and equipment expenditures (11,507) (2,932) -
Deferred stripping costs (8,734) (12,129) -
Short-term investments (5,855) - -
Acquisition of Nevoro (Note 3 (a)) - (11,061) -
Black Fox acquisition (Note 3 (b)) - (2,028) -
Proceeds from disposal of property, plant and equipment 339 - -
Restricted Certificate of Deposit (1,591) (1,569) -
Proceeds on repayment of promissory note - - 245
Proceeds on sale of marketable securities - - 192
- ------------------------------------------------------------------------------------------------
(27,348) (29,719) 437
- ------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES
Proceeds on issuance of shares 37,702 - -
Proceeds from exercise of warrants and options 3,937 - -
Proceeds from notes payable 1,259 1,790 -
Payments of notes payable (3,728) (2,602) -
Issuance of special warrants - 14,611 -
Issuance of flow-through common shares - 2,875 -
Proceeds on issuance of convertible debentures, net - 20,772 -
- ------------------------------------------------------------------------------------------------
39,170 37,446 -
- ------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 17,425 8,344 (123)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 8,426 82 205
- ------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 25,851 $ 8,426 $ 82
================================================================================================

SUPPLEMENTAL CASH FLOW INFORMATION

Interest paid $ 544 $ 991 $ -
================================================================================================
Income taxes paid $ - $ - $ -
================================================================================================


During the year ended December 31, 2003, the Company issued 61,500 shares to
acquire certain parcels of land located in Nevada. Share capital and property,
plant and equipment both increased by $134 as a result of this transaction.

During the years ended December 31, 2003, 2002 and 2001, property, plant and
equipment totaling $1,500, $1,550 and $Nil, respectively, was acquired under
capital lease obligations.


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


================================================================================
F-5

APOLLO GOLD CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2003, 2002 AND 2001
(IN THOUSANDS OF UNITED STATES DOLLARS, EXCEPT PER SHARE AMOUNTS)
================================================================================

1. NATURE OF OPERATIONS

On June 25, 2002, pursuant to a statutory Plan of Arrangement, Apollo Gold
Corporation ("Apollo" or the "Company") acquired the business of Nevoro
Gold Corporation ("Nevoro"). This acquisition has been accounted for using
the purchase method of accounting.

Apollo, through its acquisition of Nevoro, is engaged in gold mining
including extraction, processing and refining and the production of other
by-product metals, as well as related activities including exploration and
development. The Company currently owns and has rights to operate the
following facilities: the Florida Canyon Mine through Florida Canyon
Mining, Inc. ("FCMI") located in the State of Nevada, Montana Tunnels Mine
through Montana Tunnels Mining, Inc. ("MTMI") located in the State of
Montana and Diamond Hill Mine also located in the State of Montana.

The Florida Canyon Mine is an open pit, heap leach operation located near
Winnemucca, Nevada, producing gold and silver. The Florida Canyon Mine is
currently operating at its designed capacity (approximately 110,000 gold
ounces per year). The Montana Tunnels Mine is an open pit mine and mill,
located near Helena, Montana, producing ore and lead-gold and zinc-gold
concentrates. The Montana Tunnels Mine recommenced commercial production in
April 2003. Diamond Hill Mine, also located near Helena, Montana, is
currently under care and maintenance.

Apollo has one development property and four exploration properties,
Standard Mine, Pirate Gold, Nugget Field, Willow Creek, and Buffalo Canyon
each located near the Florida Canyon Mine.

Apollo also purchased the Black Fox Project (former Glimmer Mine) which is
located in the Province of Ontario near the Township of Mattheson in
September of 2002. The Project is now considered a development property.

Prior to the acquisition of Nevoro, the Company had interests in
exploration projects in Indonesia and the Philippines. In December 2001,
the Company executed an agreement with Hinoba Holdings Limited ("HL")
whereby HL was granted an option to acquire all of the rights to the
Company's Philippines project. HL defaulted on this agreement and the
Company has discontinued pursuing its interest in the Philippines and
Indonesia projects and is no longer financing the subsidiaries that own the
underlying title to the properties. During 2003, the Company sold its
interest in the Philippines and Indonesia projects for $166.


================================================================================
F-6

2. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements of Apollo are prepared by management
in accordance with Canadian generally accepted accounting principles
("Canadian GAAP") and except as described in Note 18, conform in all
material respects with accounting principles generally accepted in the
United States ("U.S. GAAP") . The principal accounting policies followed by
the Company, which have been consistently applied, are summarized as
follows:

(a) Principles of consolidation

The consolidated financial statements include the accounts of Apollo
and its wholly-owned subsidiaries. All intercompany transactions and
balances have been eliminated upon consolidation.

(b) Use of estimates

The preparation of financial statements in conformity with Canadian
GAAP requires the Company's management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
consolidated financial statements. Significant estimates used herein
include those relating to gold and other metal prices, recoverable
proven and probable reserves, available resources, available operating
capital and required reclamation costs. These estimates each affect
management's evaluation of asset impairment and the recorded balances
of broken ore on leach pad, property, plant and equipment, deferred
stripping costs, reclamation, site closure and remediation
obligations, and the future tax asset valuation allowance. It is
reasonably possible that actual results could differ in the near term
from those and other estimates used in preparing these financial
statements and such differences could be material.

(c) Foreign currency translation

With the acquisition of Nevoro, virtually all of the Company's assets
and liabilities, and revenues and expenses, are denominated in United
States (U.S.) dollars. Accordingly, effective June 25, 2002, the
Company changed its measurement currency to U.S. dollars from Canadian
dollars.

Effective December 31, 2003, the Company changed its reporting
currency from Canadian dollars to U.S. dollars, the measurement
currency. The change in reporting currency was made in order to report
the Company's financial position and results of operations in the
currency of measurement following the Company's listing on the AMEX
Exchange in the United States. Historical results have been restated
to the measurement currency. Previously, for purposes of financial
reporting, the Company's financial statements were converted from U.S.
dollars, the measurement currency, to the Canadian dollar, the
reporting currency, using the current rate method.


================================================================================
F-7

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Foreign currency translation (continued)

Prior to June 25, 2002, foreign currency denominated monetary assets
and liabilities had been translated into Canadian dollars at the rate
of exchange prevailing at the balance sheet date with any
corresponding gains or losses being recognized in the statement of
loss. Foreign currency revenues and expenses had been translated at
the rates prevailing on the transaction date.

(d) Cash and cash equivalents

Cash and cash equivalents are comprised of cash, term deposits and
treasury bills. The original maturity dates of term deposits and
treasury bills is not in excess of 90 days.

(e) Short-term investments

Short-term investments are comprised of term deposits with maturity
dates of greater than 90 days and less than one year from date of
acquisition.

(f) Broken ore on leach pads

Broken ore on leach pad comprises gold in process in heap leach pads
and in stockpiles that are valued at the lower of average production
cost and net realizable value. Based on current production estimates,
the gold contained within the heap leach pad is recoverable over a
period in excess of twelve months. The cost of gold in process and
final products is comprised of costs of mining the ore and hauling it
to the mill, costs of processing the ore and an attributable amount of
mining and production overheads relating to deferred mineral property
and development costs. Units of gold on the leach pad are based on the
amount of ore introduced into production, expected recovery and assay
results.

Direct production costs associated with ore on the heap leach pads are
deferred and amortized as the contained gold is recovered. Based upon
actual metal recoveries, the Company periodically evaluates and
refines estimates used in determining the amortization and carrying
value of deferred mining costs associated with ore under leach.

(g) Inventories

Metals inventories are stated at the lower of cost and net realizable
value determined by using the first-in, first-out method. Materials
and supplies at the mine sites are valued at the lower of direct cost
of acquisition and replacement cost.


================================================================================
F-8

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(h) Property, plant and equipment

Mine development costs are capitalized after proven and probable
reserves have been identified. Amortization is calculated using the
units-of-production method over the expected life of the operation
based on the estimated recoverable gold equivalent ounces or value of
metals over proven and probable reserves and a portion of resources
expected to be converted to reserves based on past results.

Buildings and equipment are recorded at acquisition cost and amortized
over the remaining reserves of the mine site on a units-of-production
basis. Equipment that is mobile is amortized on a straight-line basis
over the estimated useful life of the equipment of five to ten years.
Costs relating to repair and maintenance costs are expensed as
incurred.

Financing and acquisition costs including interest and fees are
capitalized on the basis of expenditures incurred for the acquisition
of assets and mineralized properties and related development
activities. Capitalization ceases when the asset or property is
substantially complete and ready to produce at commercial rates.

(i) Mineral rights

Mineral rights include the cost of obtaining patented United States of
America mining claims and the cost of acquisition of properties.
Significant payments related to the acquisition of land and mineral
rights are capitalized. If a mineable ore body is discovered, such
costs are amortized when production begins using the
units-of-production method based on proven and probable reserves. If
no mineable ore body is discovered or such rights are otherwise
determined to have no value, such costs are expensed in the period in
which it is determined the property has no future economic value.


================================================================================
F-9

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) Deferred stripping costs

Mining costs associated with open-pit deposits that have diverse ore
grades and waste-to-ore ton ratios are deferred and amortized over the
mine life. These mining costs arise from the removal of waste rock
commonly referred to as "deferred stripping costs". Amortization of
amounts deferred is based on a ratio, calculated as estimated total
waste mining costs divided by the current proven and probable reserves
and mineral resources expected to be converted into mineral reserves.
This ratio is used to calculate the current period production cost
charged against earnings by multiplying the ratio times the reserves
mined during the period. Amortization of deferred stripping costs is
included within direct operating costs in our statement of operations.
This accounting method results in the smoothing of these costs over
the life of the mine, rather than expensing them as incurred. The full
amount of deferred stripping costs may not be expensed until the end
of the life of the mine. Some mining companies expense these costs as
incurred, which may result in the reporting of greater volatility in
period to period results of operations. Deferred stripping costs are
included with related mining property, plant and equipment for
impairment testing purposes.

(k) Exploration expenditures

Exploration expenditures are expensed as incurred during the reporting
period.

(l) Property evaluations

The Company evaluates the carrying amounts of its mining properties
and related buildings, plant and equipment when events or changes in
circumstances indicate that the carrying amount may not be
recoverable. If the Company has reason to believe that an impairment
may exist, estimated future undiscounted cash flows are prepared using
estimated recoverable ounces of gold (considering current proven and
probable reserves and mineral resources expected to be converted into
mineral reserves) and corresponding by-product credits along with
estimated future metals prices and estimated operating and capital
costs. The inclusion of mineral resources is based on various
circumstances, including but not limited to the existence and nature
of known mineralization, location of the property, results of recent
drilling and analysis to demonstrate the ore is commercially
recoverable. The future cash flows cover the known ore reserve at the
time. If the future undiscounted cash flows are less than the carrying
value of the assets, the assets will be written down to fair value and
the write-off charged to earnings in the current period.


================================================================================
F-10

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(m) Reclamation and closure costs

The Company, as part of the purchase accounting for the acquisition of
Nevoro, has recorded the present value of estimated future asset
retirement obligation and reclamation with a corresponding increase to
the carrying amount of the related asset. The carrying value will be
amortized over the life of the related assets on a unit-of-production
basis and the related liabilities are accreted to the original present
value estimate.

The present value of the reclamation liabilities may be subject to
change based on management's current estimates, changes in remediation
technology or changes to the applicable laws and regulations by
regulatory authorities, which affects the ultimate cost of remediation
and reclamation.

(n) Revenue recognition

Revenue from the sale of gold and by-products is recognized when the
following conditions are met: persuasive evidence of an arrangement
exists; delivery has occurred in accordance with the terms of the
arrangement; the price is fixed or determinable and collectability is
reasonably assured. Revenue for gold bullion is recognized at the time
of delivery and transfer of title to counter-parties. Revenue for lead
and zinc concentrates is determined by contract as legal title to the
concentrate transfers and includes provisional pricing arrangements
accounted for as an embedded derivative instrument under SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" as
amended.

(o) Commodity contracts

The Company enters into hedging contracts for gold involving the use
of combinations of put and call options. These options have common
notional amounts and maturity dates and are designated in combination
as hedges of future gold sales on the basis that they generate
offsetting cash flows. No premium has been received with respect to
these options.

Providing that the criteria for an effective hedge are met, gains and
losses on the contracts are deferred and recognized in revenue at the
time of the sale of the designated future gold production.


================================================================================
F-11

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(p) Stock incentive plans

The Company does not record stock options issued to employees as
compensation expense and discloses pro forma information on the fair
value of stock compensation issued during the period in the notes to
the financial statements. This method is acceptable under existing
CICA guidelines for stock based compensation and other stock based
payments for the year ended December 31, 2003.

Handbook Section 3870, however, does require additional disclosures
for options granted to employees, including disclosure of pro forma
earnings and pro forma earnings per share as if the fair value based
accounting method had been used to account for employee stock options
(see Note 10 (g)).

Beginning in the first quarter of 2004, the Company will expense stock
options in the financial statements as a component of compensation
expense in accordance with new recommendations of the CICA with
respect to stock based compensation which will come into effect for
the Company on January 1, 2004. Under this new standard, direct awards
of stock granted to employees are recorded at fair value on the date
of grant and the associated expense is amortized over the vesting
period.

(q) Income taxes

The Company accounts for income taxes whereby future income tax assets
and liabilities are computed based on differences between the carrying
amount of assets and liabilities on the balance sheet and their
corresponding tax values using the enacted income tax rates at each
balance sheet date. Future income tax assets also result from unused
loss carryforwards and other deductions. The valuation of future
income tax assets is reviewed annually and adjusted, if necessary, by
use of a valuation allowance to reflect the estimated realizable
amount. Although the Company has tax loss carryforwards (see Note 11),
there is uncertainty as to utilization prior to their expiry.
Accordingly, the future income tax asset amounts have been fully
offset by an uncertainty provision.

(r) Loss per share

The basic loss per share is computed by dividing the net loss by the
weighted average number of common shares outstanding during the year.
The fully diluted loss per share reflects the potential dilution of
common share equivalents, such as outstanding stock options and share
purchase warrants, in the weighted average number of common shares
outstanding during the year, if dilutive. For this purpose, the
"treasury stock method" is used for the assumed proceeds upon the
exercise of stock options and warrants that are used to purchase
common shares at the average market price during the year.


================================================================================
F-12

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(s) Comparative figures

Certain of the prior year's figures have been reclassified to conform
to the current year's presentation.


3. ACQUISITION

(a) Plan of arrangement

The Company acquired Nevoro as of June 25 2002. In order to finance
the acquisition and continuing operations of Nevoro, the Company
completed a private placement financing of $20,772, net of issue
expenses. The private placement was in the form of non-interest
bearing convertible secured debentures. The debentures were converted
into common shares and warrants of the Company upon completion of the
Plan of Arrangement as described in Note 10.


================================================================================
F-13

3. ACQUISITION (CONTINUED)

(a) Plan of arrangement (continued)

A summary of the allocation of the purchase price to the Nevoro assets
acquired, less liabilities assumed, at fair value on June 25, 2002 is
as follows:

ASSETS, at fair value
Accounts receivable $ 1,512
Prepaid expenses 155
Broken ore on leach pad 10,587
Inventories 2,667
--------------------------------------------
14,921
--------------------------------------------

Broken on leach pad - long-term 1,868
Property, plant and equipment 29,272
Restricted certificate of deposit 3,733
--------------------------------------------
34,873
--------------------------------------------
49,794
--------------------------------------------

LIABILITIES, at fair value
Accounts payable and accruals 7,329
Notes payable 1,767
Property and mining taxes payable 975
--------------------------------------------
10,071
--------------------------------------------

Notes payable 5,437
Accrued site closure costs 20,876
--------------------------------------------
26,313
--------------------------------------------
36,384
--------------------------------------------
NET ASSETS OF NEVORO ACQUIRED $13,410
============================================

CONSIDERATION
Cash $11,061
Shares 2,349
--------------------------------------------
TOTAL CONSIDERATION PAID $13,410
============================================


================================================================================
F-14

3. ACQUISITION (CONTINUED)

(a) Plan of arrangement (continued)

Apollo issued 1,970,000 shares (Note 10) valued at $2,349 to the
former shareholders of Nevoro as part consideration for the
acquisition of all of the outstanding shares of Nevoro. The value of
the shares issued was determined based on the average market price of
common shares over the two-day period before and after the terms of
the acquisition were agreed to and announced, less imputed share
issuance costs of $126.

In addition, certain key employees, officers and directors are
eligible to receive up to an aggregate of 2,780,412 options of the
Company. Each option will be exercisable for a period of five years
from the effective date and entitle the holder to acquire one share at
an exercise price of $0.80 per share. In fiscal 2002, following the
completion of the Plan of Arrangement, one-half of the options vested
based upon satisfying the established performance criteria. The
balance of the options vest based upon satisfying the established
fiscal 2003 performance criteria. These new unvested options were not
included as part of the purchase consideration but have been accounted
for in accordance with the Company's accounting policy for employee
stock options as outlined in Note 2.

The statement of earnings of Apollo for the year ended December 31,
2002 includes the earnings of Nevoro for the period from June 25,
2002.

(b) Purchase of Black Fox property

In September of 2002, Apollo completed a transaction ("Glimmer
Transaction") to purchase the Glimmer property near the city of
Timmins in the Province of Ontario. The Glimmer Transaction included
purchase price consideration of $2,028 cash and 2,080,000 Apollo
shares valued at $2,949. The total cost of the property is included in
property, plant and equipment. If the old Glimmer mine is developed
and reaches commercial production, an additional $2,322 (Cdn.$3,000)
is due to the vendors to purchase the property free and clear of all
encumbrances. The additional consideration will be recorded when it is
more likely than not that it will be payable.

Subsequent to the acquisition, management commenced a new exploration
project on adjacent targets under the name "Black Fox". In the third
quarter of 2003, following the delineation of proven and probable
reserves, Black Fox was reclassified as an advanced development
project whereby costs associated with the project will be capitalized
until commercial production is reached.


================================================================================
F-15

4. INVENTORIES

Inventories consists of:

2003 2002
------ ------

Concentrate inventory $ 98 $ -
Dore inventory 56 -
Materials and supplies 2,685 2,926
--------------------------------------
$2,839 $2,926
======================================


5. PROPERTY, PLANT AND EQUIPMENT

The components of property, plant and equipment at December 31 are as
follows:

2003 2002
------------------------------- --------
Accumulated Net Book Net Book
Cost Depreciation Value Value
------- ------------- ------- --------
Mine assets
Building, plant and equipment $13,712 $ 3,069 $10,643 $ 7,293
Mining properties and
development costs 25,740 5,328 20,412 15,963
--------------------------------------------------------------------------
39,452 8,397 31,055 23,256
Mineral rights 7,464 - 7,464 7,119
--------------------------------------------------------------------------
Total property, plant and
equipment $46,916 $ 8,397 $38,519 $30,375
==========================================================================

Included in building, plant and equipment are assets held under capital
leases which had cost of $3,190 and $792, and accumulated depreciation of
$1,592 and $133, respectively, as at December 31, 2003 and 2002.


================================================================================
F-16

6. RESTRICTED CERTIFICATE OF DEPOSIT

The restricted certificate of deposit represents cash that has been placed
in trust as security to the State of Montana and the State of Nevada
relating to the Company's site closure obligations (see Note 9).

The Company has entered into an agreement with CNA, an insurer, to complete
the bonding requirements at MTMI. CNA committed to an approximate $15,000
15-year term bonding facility which is not cancelable, unless MTMI fails to
meet its requirements under the arrangement. The agreement obligates MTMI
to make payments of approximately $75 monthly until the balance in the
trust account is equal to the penal sum of the CNA bond. At December 31,
2003, the restricted certificate of deposit for bonding requirements at
MTMI is $2,663 (2002 - $1,557).

At the Florida Canyon Mine the restricted certificate of deposit for
bonding requirements at December 31, 2003 is $3,700 (2002 - $3,538). This
covers areas excluded from the coverage of the SAFECO bond (Note 9). The
Company also has other amounts on deposit with respect to its other
projects.


7. NOTES PAYABLE

The notes payable are secured by a fixed charge on certain machinery and
equipment and bear interest at various rates between 3.615% and 7.5%, and
are repayable as follows:

2004 $ 4,117
2005 2,650
2006 625
-------------------------------------
Total notes payable 7,392
Less current portion (4,117)
-------------------------------------
Total long-term obligations $ 3,275
=====================================


8. EMPLOYEE BENEFIT PLAN

The Company maintains a defined contribution 401(K) plan for all US
employees. Employees have the right to invest up to 25% of their respective
earnings up to the statutory limits. The Company will match 100% of the
first 6% invested. The vesting schedule is two years. All US employees are
eligible to participate on the first of the month after their date of hire.

The amounts charged to earnings for the Company's defined contribution plan
totaled $590, $522 and $Nil for the years ended December 31, 2003, 2002 and
2001, respectively.

The Company maintains medical and life insurance benefits only for all
active employees.


================================================================================
F-17

9. ACCRUED SITE CLOSURE COSTS

All of the Company's operations are subject to reclamation and closure
requirements. Although the ultimate amount of site restoration costs is
uncertain, on a regular basis, the Company monitors these costs and
together with third party engineers prepares internal estimates to evaluate
their bonding requirements. The estimates prepared by management are then
reconciled with the requirements of the State and Federal officials.

At December 31, 2003, the accrued site closure liability amounted to
$21,619 (2002 - $20,508). This liability is based on the most recently
prepared third party engineer reports, together with management's estimate
of the Company's severance obligation upon closure of the related facility.
The liability is covered by a combination of both surety bonds as well as a
restricted certificate of deposit which in aggregate are valued at
approximately $38,729.

In view of the uncertainties concerning future removal and site restoration
costs, as well as the applicable laws and legislations, the ultimate costs
to the Company could differ materially from the amounts estimated by
management. Future changes, if any, due to their nature and
unpredictability, could have a material impact and would be reflected
prospectively, as a change in accounting estimate.

One of the Company's sureties, SAFECO Insurance Company of America
("SAFECO"), has sent notice to the regulatory authorities to cancel one of
the bonds currently valued at $16,936. Through litigation, the surety
instrument is still in place under full force and effect. This legal
decision was challenged by SAFECO and during 2003 the original judgment was
affirmed by the Court of Appeals. SAFECO did not take any further appeal
within the time permitted for appeals and the favorable judgment has become
final.

The following table summarizes the effect to the Company's accrued site
closure costs:

Balance, December 31, 2001 $ -
Additions during the year upon acquisition of Nevoro (Note 3) 20,876
Accretion 771
Expenditures (1,139)
-----------------------------------------------------------------------
Balance, December 31, 2002 20,508
Accretion 1,280
Expenditures (169)
-----------------------------------------------------------------------
Balance, December 31, 2003 $21,619
=======================================================================

The Company has estimated that the total obligations associated with the
retirement of the Florida Canyon and Montana Tunnels mines at December 31,
2003 is $32,140. The $21,619 fair value of these obligations is determined
using a 7.5% credit adjusted risk-free discount rate and expected payment
of obligations over fifteen years.


================================================================================
F-18

10. SHARE CAPITAL

(a) Authorized

Unlimited number of common shares with no par value

(b) Issued and outstanding



Contributed Special
Shares Amount Surplus Warrants
----------- -------- ------------ ----------

Balance, December 31, 2000 and 2001 834,124 $ 41,186 $ 177 $ -
Conversion of debentures (Note 10 (d)(i)) 28,750,000 16,623 4,149 -
Issuance of shares on Nevoro
acquisition (Note 3 (a)) 1,970,000 2,349 - -
Black Fox purchase (Note 3 (b)) 2,080,000 2,949 - -
Conversion of special warrants
private placement issued
September 13, 2002 (Note 10 (d)(ii)) 4,963,000 6,224 - -
Flow-through common shares
(Note 10 (d)(iii)) 1,593,750 2,875 - -
Share compensation - - 615 -
Special warrants private placement
issued December 23, 2002
(Note 10 (d)(iv)) - - 2,082 6,305
- ------------------------------------------------------------------------------------------
Balance, December 31, 2002 40,190,874 72,206 7,023 6,305
Shares issued for cash (Note 10 (c)) 24,432,300 37,314 388 -
Conversion of special warrants 6,000,000 6,305 - (6,305)
Warrants exercised 2,381,500 3,810 - -
Options exercised 158,616 127 - -
Nevoro acquisition, senior executive
share compensation - - 376 -
Shares issued to supplier 50,000 113 - -
Shares issued for land 61,500 134 - -
Fiscal 2002 stock-based compensation
issued in 2003 265,000 615 (615) -
- ------------------------------------------------------------------------------------------
Balance, December 31, 2003 73,539,790 $120,624 $ 7,172 $ -
==========================================================================================



================================================================================
F-19

10. SHARE CAPITAL (CONTINUED)

(c) Shares issued in 2003

On September 26, 2003, the Company issued 22,300,000 shares for
proceeds of $37,169, net of agent's commissions of $2,230, expenses of
$679 and fair value of agent's options of $353.

On October 27, 2003, the agents exercised their over-allotment option
and the Company issued a further 2,132,300 shares for proceeds of
$3,662, net of expenses of $220 and fair value of agent's options of
$35. The Company granted the agents 732,969 agent's options with an
exercise price of $1.67 (Cdn.$2.25) per option in connection with this
issuance. These agent's options expire in two years and vest
immediately. Using the fair value based method for stock-based
compensation, share issuance costs of approximately $388 were
recognized. This amount was determined using an option pricing model
assuming no dividends were paid, a volatility of the Company's share
price of 53%, an expected life of the options of two years, and annual
risk-free rate of 3.50%.

(d) Shares issued in 2002

(i) In 2002, the Company completed a private placement financing of
$20,772, net of issue costs in the form of non-interest bearing
convertible secured debentures, in order to finance the
acquisition of Nevoro. Upon completion of the Plan of
Arrangement, the debentures were converted into 28,750,000 common
shares and 7,187,500 warrants of the Company. In addition, the
underwriters were granted 718,750 warrants as additional
compensation in connection with the issuance of the convertible
debentures. Each warrant entitles the holder to acquire one share
at a price of $1.60 per share until March 21, 2004. An amount of
$4,149 was allocated to both sets of warrants and was presented
as contributed surplus.

(ii) On September 13, 2002 the Company issued 4,963,000 special
warrants convertible to common shares to raise an additional
$6,889, net of share issue expenses of $665. The warrants were
subsequently converted into common shares.

(iii) On November 21, 2002, under a private placement financing, the
Company issued 1,500,000 flow-through common shares as defined in
subsection 66(15) of the Income Tax Act (Canada). The aggregate
proceeds amounted to $2,875. The Company issued 93,750 additional
common shares from treasury, with an assigned value of $165, as
consideration to the underwriter in connection with this
transaction.


================================================================================
F-20

10. SHARE CAPITAL (CONTINUED)

(d) Shares issued in 2002 (continued)

(iv) On December 23, 2002, the Company issued 6,000,000 stock-warrant
units under a private placement financing. Each unit consisted of
one common share, and one-half of one common share purchase
warrant. Each full common share purchase warrant entitled the
holder to acquire from the Company, for a period of four years,
at a price of $2.10 (Cdn.$3.25) per warrant, one additional
common share. Each unit was issued at a price of $1.55
(Cdn.$2.40) for aggregate net proceeds of $9,343, net of issuance
expenses of $955. Of the original proceeds, $2,082 was allocated
to the related warrants and was presented as contributed surplus.
During fiscal 2003 6,000,000 units were converted into common
shares.

(e) Warrants

The following summarizes outstanding warrants as at December 31, 2003:

Number of Exercise Expiry
Warrants Shares Price Date
--------- ----------- ----------------- -----------------
5,524,750 5,524,750 $ 1.60 March 21, 2004
3,000,000 3,000,000 2.10 (Cdn.$3.25) December 23, 2006
------------------------------------------------------------
8,524,750 8,524,750
============================================================


================================================================================
F-21

10. SHARE CAPITAL (CONTINUED)

(f) Options

A summary of information concerning outstanding stock options at
December 31, 2003 is as follows:

Performance-based
Fixed Stock Options Stock Options
--------------------- ---------------------
Weighted Weighted
Number of Average Number of Average
Common Exercise Common Exercise
Shares Price Shares Price
---------- --------- ---------- ---------
Balances, December 31, 2000
and 2001 68,855 $ 44.14 - $ -
Options granted - - 2,780,412 0.80
Options cancelled (68,855) 44.14 - -
-------------------------------------------------------------------------
Balances, December 31, 2002 - - 2,780,412 0.80
Options granted 2,039,100 2.20 - -
Options exercised - - (158,616) 0.80
Options cancelled (151,800) 2.24 (121,642) 0.80
-------------------------------------------------------------------------
Balances, December 31, 2003 1,887,300 $ 2.20 2,500,154 $ 0.80
=========================================================================


================================================================================
F-22

10. SHARE CAPITAL (CONTINUED)

(f) Options (continued)

(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.

The following table summarizes information concerning outstanding
and exercisable fixed stock options at December 31, 2003:


Options Outstanding Options Exercisable
---------------------------------------------- ------------------------
Weighted Weighted
Average Average
Exercise Exercise
Number Expiry Price Number Price
Outstanding Date per Share Exercisable per Share
----------- --------------------- ---------- ------------ ----------

1,563,200 February 18, 2013 $ 2.24 - $ -
4,100 March 28, 2013 2.34 - -
70,000 May 21, 2013 2.27 - -
150,000 August 22, 2013 2.12 - -
100,000 November 13, 2013 1.67 - -
------------------------------------------------------------------------
1,887,300 $ 2.20 - $ -
========================================================================

(ii) Performance-based stock option plan

As part of the Nevoro acquisition, 2,780,412 performance-based
options with an expiry date of June 25, 2007 were granted to
certain directors, officers and employees, and are subject to a
reduction if certain performance criteria are not met.
Furthermore, certain senior executives are entitled to receive
530,000 performance-based common shares subject to a reduction if
certain performance criteria are not met.


================================================================================
F-23

10. SHARE CAPITAL (CONTINUED)

(f) Options (continued)

(ii) Performance-based stock option plan (continued)

In fiscal 2002, one-half of the performance-based options and
common shares vested based upon the established performance
criteria. The balance of the options vest based upon the
established fiscal 2003 performance criteria. Furthermore, one
half of the related performance-based common shares were approved
for issuance in 2003 based upon the fiscal 2002 performance and
the balance of the shares vest based upon the established fiscal
2003 performance criteria. An expense of $376 has been recorded
in the statement of operations relating to the fair value expense
of the performance-based common shares vesting in fiscal 2003 and
credited to contributed surplus.

(g) Stock-based compensation

The following pro forma financial information presents the net loss
for the year and the basic and diluted loss per common share had the
Company adopted the fair value method of accounting for stock options
as set out in CICA Handbook Section 3870, Stock-Based Compensation and
Other Stock-Based Payments:

2003 2002
-------- --------
Net loss
As reported $(2,186) $(3,051)
Compensatory fair value of options (3,871) (1,980)
--------------------------------------------------------
Pro forma $(6,057) $(5,031)
========================================================

Basic and diluted loss per share
As reported $ (0.04) $ (0.16)
Pro forma (0.11) (0.26)
========================================================


================================================================================
F-24

10. SHARE CAPITAL (CONTINUED)

(g) Stock-based compensation (continued)

Using the fair value based method for stock-based compensation,
additional costs of approximately $3,876 and $1,980 would have been
recorded for the years ended December 31, 2003 and 2002, respectively.
These amounts were determined at the date of grant using a
Black-Scholes option pricing model with the following weighted average
assumptions:

2003 2002
------ ------

Risk free interest rate 3.534% 3.550%
Dividend yield 0% 0%
Volatility 75% 92%
Expected life in years 5.0 2.0


The weighted average grant-date fair value of stock options granted
during 2003 was $1.40.

(h) Issuable common shares

The Company is committed under a previous agreement to issue such
number of fully paid common shares as shall have a market value of
$231. To date, none of these shares have been issued.


F-25

11. INCOME TAXES

The Company did not record a provision or benefit for income taxes for the
periods ended December 31, 2003, 2002 and 2001, due to the availability of
net operating loss carryforwards and the uncertainty of their future
realization.

The provision for income taxes reported differs from the amounts computed
by applying the cumulative Canadian federal and provincial income tax rates
to the loss before tax provision due to the following:

2003 2002 2001
------- -------- -------
Statutory tax rate 37.62% 39.62% 44.67%
-------------------------------------------------------------------

Recovery of income taxes computed
at standard rates $ 822 $ 1,209 $ 203
Lower foreign tax rates (10) (34) -
Tax losses not recognized in the period
that the benefit arose (812) (1,175) (203)
-------------------------------------------------------------------
$ - $ - $ -
===================================================================

The tax effects of temporary differences that would give rise to
significant portions of the future tax assets and future tax liabilities at
December 31, were as follows:

2003 2002
--------- ---------
Future income taxes
Net operating losses carried forward $ 35,217 $ 32,455
Foreign exploration and development expenses 1,784 1,370
--------------------------------------------------------------------
37,001 33,825
Less: Valuation allowance (37,001) (33,825)
--------------------------------------------------------------------
Net future income tax asset $ - $ -
====================================================================

Utilization of the net operating losses carried forward and the foreign
exploration and development expenses are subject to limitations.

At December 31, 2003, the Company has the following unused tax losses
available for tax purposes:

Country Amount Expiry
------------- ------- ---------

Canada $15,718 2004-2010
United States 84,232 2011-2023


================================================================================
F-26

12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

(a) Market risk

Due to the nature of the precious metals market, the Company is not
dependent on a significant customer to provide a market for its
refined gold and silver. However, if the Company had to change the
smelters to which zinc, lead, and pyrite concentrates are shipped, the
additional transportation costs could be considerable. Although it is
possible that the Company could be directly affected by weaknesses in
the metals processing business, the Company periodically monitors the
financial condition of its customers.

Accounts receivable at December 31, 2003 are due from two customers.

(b) The estimated fair value of the Company's financial instruments was as
follows:

December 31,
-------------------------------------
2003 2002
------------------ -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- ------- --------- ------

Cash and cash equivalents $ 25,851 $25,851 $ 8,426 $8,426
Short-term investments 5,855 5,855 - -
Accounts receivable 4,647 4,647 3,228 3,228
Accounts payable 5,848 5,848 4,935 4,935
Accrued liabilities 2,781 2,781 1,961 1,961
Notes payable
Current 4,117 4,117 3,114 3,114
Non-current 3,275 3,275 5,247 5,247

The fair value of notes payable was determined using the discounted
cash flows at prevailing market rates. The fair value of the Company's
other financial instruments was estimated to approximate their
carrying value due primarily to the immediate or short-term maturity
of these financial instruments.


================================================================================
F-27

12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

(c) Gold hedges

The Company has entered into hedging contracts, with Standard Bank
London Limited, for gold in the aggregate amount of 100,000 ounces
involving the use of combinations of put and call options. As of
December 31, 2003 there are 64,000 ounces remaining on these
contracts. The contracts give the holder the right to buy, and the
Company the right to sell, stipulated amounts of gold at the upper and
lower exercise prices, respectively. The contracts continue through
April 25, 2005 with a put option strike price of two hundred and
ninety-five dollars per ounce and a call option strike price of three
hundred and forty-five dollars per ounce. The Company has also entered
into certain spot deferred forward contracts for the delivery of
15,862 ounces of gold. Gains or losses on these spot deferred forward
contracts are recognized as an adjustment of revenue in the period
when the originally designated production is sold. As at December 31,
2003, the fair value of the contracts is a loss of $5,911 (December
31, 2002 - $2,265).

The contracts mature as follows:

Ounces of
Gold
---------
2004 63,862
2005 16,000
-----------------
79,862
=================


13. COMMITMENTS AND CONTINGENCIES

(a) Royalties

The Company's properties are subject to royalty obligations based on
minerals produced from the properties. The current reserves at the
FCMI are subject to a 2.5% net smelter return royalty. The MTMI
reserves are not subject to a royalty obligation. Royalty obligations
for other properties arise upon mine production.

(b) Environmental

The Company's mining and exploration activities are subject to various
federal, provincial and state laws and regulations governing the
protection of the environment. These laws and regulations are
continually changing and generally becoming more restrictive. The
Company conducts its operations so as to protect public health and the
environment and believes its operations are materially in compliance
with all applicable laws and regulations. The Company has made, and
expects to make in the future, expenditures to comply with such laws
and regulations.


================================================================================
F-28

13. COMMITMENTS AND CONTINGENCIES (CONTINUED)

(c) Litigation and claims

The Company is from time to time involved in various claims, legal
proceedings and complaints arising in the ordinary course of business.
The Company does not believe that adverse decisions in any pending or
threatened proceedings related to any matter, or any amount which it
may be required to pay by reason thereof, will have a material effect
on the financial conditions or future results of operations of the
Company.

(d) Bank indebtedness

During the year ended December 31, 2003 the Company entered into a
$5,000 Revolving Loan, Guaranty and Security Agreement with Standard
Bank London Limited ("Standard Bank"). The Company must satisfy
certain requirements in order for Standard Bank to advance the maximum
amount of the loan. Until the commitment under the line of credit
expires or has been terminated, the Company must meet certain
covenants. As of December 31, 2003, the Company has no amount
outstanding under the revolving loan and is in compliance with the
covenants.


14. LEASE COMMITMENTS

Minimum lease payments under capital and non-cancelable operating leases
and the present value of net minimum payments at December 31, 2003 were as
follows:

Capital Operating
Leases Leases
-------- ----------
2004 $ 1,234 $ 160
2005 435 86
2006 254 77
2007 - 75
2008 - 25
-------------------------------------------------------------------------
Total 1,923 $ 423
==========
Less imputed interest 52
--------
Total present value of minimum capitalized payments 1,871
Less current portion of capital lease obligations 1,202
-------------------------------------------------------------
Long-term capital lease obligations $ 669
=============================================================

Rent expense under non-cancelable operating leases was $87, $17 and $Nil
for 2003, 2002 and 2001, respectively. The current portion of the capital
lease obligations is included in current portion of notes payable and the
long-term portion is included in long-term portion of notes payable in the
consolidated balance sheets.


================================================================================
F-29

15. NET CHANGE IN NON-CASH OPERATING WORKING CAPITAL ITEMS

2003 2002 2001
-------- -------- ------
(Increase) decrease in:
Accounts receivable $(1,419) $(1,716) $ -
Prepaids (20) (346) 12
Broken ore on leach pad (718) 1,752 -
Inventories 87 (259) -
Increase (decrease) in:
Accounts payable 913 (668) (45)
Accrued liabilities 820 95 -
Property and mining taxes payable 169 (64) -
---------------------------------------------------------------
$ (168) $(1,206) $ (33)
===============================================================


16. RELATED PARTY TRANSACTIONS

The Company had the following related party transactions during each of the
years in the three-year period ended December 31, 2003:

2003 2002 2001
----- ----- -----
Legal fees paid to two law firms, a partner
of each firm is a director of the Company $ 795 $ 153 $ -

Legal fees paid to law firm, a partner of which
is related to an officer of the Company 463 77 -

Consulting services paid to a relative of an
officer and director of the Company 64 63 -

These transactions are in the normal course of business and are measured at
the exchange amount which is the consideration established and agreed to by
the related parties.


17. SEGMENTED INFORMATION

Apollo operates the Montana Tunnels and Florida Canyon Mines in the United
States and the Black Fox development project in Canada. As the products and
services of the Company's largest segments, Montana Tunnels and Florida
Canyon, are essentially the same, 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 accounting
policies for these segments are the same as those followed by the Company
as a whole.


================================================================================
F-30

17. SEGMENTED INFORMATION (CONTINUED)

Amounts as at December 31, 2003 are as follows:



Montana Florida Black Corporate
Tunnels Canyon Fox and Other Total
-------- -------- ------ ---------- --------

Cash and cash equivalents $ 754 $ 19 $ 95 $ 24,983 $ 25,851
Short-term investments - - - 5,855 5,855
Broken ore on leach pad - current - 9,594 - - 9,594
Other non-cash current assets 5,345 2,263 71 359 8,038
- -------------------------------------------------------------------------------------
6,099 11,876 166 31,197 49,338
Broken ore on leach pad - long-term - 1,827 - - 1,827
Property, plant and equipment 15,559 13,529 8,914 517 38,519
Deferred stripping costs 24,033 - - - 24,033
Restricted certificate of deposit 2,663 3,809 377 44 6,893
- -------------------------------------------------------------------------------------
Total assets $ 48,354 $ 31,041 $9,457 $ 31,758 $120,610
=====================================================================================

Current liabilities $ 6,140 $ 6,515 $ 507 $ 664 $ 13,826
Notes payable 980 2,295 - - 3,275
Accrued site closure costs 9,148 12,471 - - 21,619
- -------------------------------------------------------------------------------------
Total liabilities $ 16,268 $ 21,281 $ 507 $ 664 $ 38,720
=====================================================================================


Amounts as at December 31, 2002 are as follows:



Montana Florida Black Corporate
Tunnels Canyon Fox and Other Total
-------- -------- ------ ---------- -------

Cash and cash equivalents $ 89 $ 20 $2,814 $ 5,503 $ 8,426
Broken ore on leach pad - current - 8,990 - - 8,990
Other non-cash current assets 3,678 2,725 15 268 6,686
- ------------------------------------------------------------------------------------
3,767 11,735 2,829 5,771 24,102
Broken ore on leach pad - long-term - 1,713 - - 1,713
Property, plant and equipment 12,627 12,771 4,977 - 30,375
Deferred stripping costs 16,998 - - - 16,998
Restricted certificate of deposit 1,557 3,538 100 107 5,302
- ------------------------------------------------------------------------------------
Total assets $ 34,949 $ 29,757 $7,906 $ 5,878 $78,490
====================================================================================

Current liabilities $ 4,847 $ 4,357 $ - $ 1,717 $10,921
Notes payable 1,040 4,207 - - 5,247
Accrued site closure costs 8,679 11,829 - - 20,508
- ------------------------------------------------------------------------------------
Total liabilities $ 14,566 $ 20,393 $ - $ 1,717 $36,676
====================================================================================



================================================================================
F-31

17. SEGMENTED INFORMATION (CONTINUED)

Amounts for the years ended December 31, 2003, 2002 and 2001 are as
follows:



YEAR ENDED DECEMBER 31, 2003
-----------------------------------------------------
Montana Florida Black Corporate
Tunnels Canyon Fox and Other Total
--------- --------- -------- ----------- --------

Revenue from sale of minerals $ 30,858 $ 35,983 $ - $ - $66,841
- -----------------------------------------------------------------------------------------
Direct operating costs 27,149 28,535 - - 55,684
Depreciation and amortization 1,251 3,731 - 15 4,997
General and administrative - - - 4,651 4,651
Share-based compensation - - - 376 376
Accrued site closure costs
- accretion expense 500 780 - - 1,280
Royalties - 898 - - 898
Exploration and development - - 1,553 564 2,117
- -----------------------------------------------------------------------------------------
28,900 33,944 1,553 5,606 70,003
- -----------------------------------------------------------------------------------------
Operating income (loss) 1,958 2,039 (1,553) (5,606) (3,162)
Interest income - - - 213 213
Interest expense (152) (339) - (53) (544)
Foreign exchange gain (loss)
and other - - (271) 1,578 1,307
- -----------------------------------------------------------------------------------------
Net (loss) income $ 1,806 $ 1,700 $(1,824) $ (3,868) $(2,186)
=========================================================================================

Investing activities
Property, plant and equipment
expenditures $ 4,184 $ 4,489 $ 3,937 $ 531 $13,141
Deferred stripping expenditures 8,734 - - - 8,734



================================================================================
F-32

17. SEGMENTED INFORMATION (CONTINUED)



Year ended December 31, 2002
----------------------------------------------------
Montana Florida Black Corporate
Tunnels Canyon Fox and Other Total
--------- --------- ------- ----------- --------

Revenue from sale of minerals $ - $ 20,410 $ - $ - $20,410
- ----------------------------------------------------------------------------------------

Direct operating costs - 15,696 - 30 15,726
Depreciation and amortization - 3,488 - - 3,488
General and administrative - - - 2,286 2,286
Share-based compensation - - - 615 615
Accrued site closure costs
- accretion expense 300 471 - - 771
Royalties - 508 - - 508
Exploration and development 114 - - 337 451
- ----------------------------------------------------------------------------------------
414 20,163 - 3,268 23,845
- ----------------------------------------------------------------------------------------
Operating income (loss) (414) 247 - (3,268) (3,435)
Interest income 29 - - 47 76
Interest expense (260) (463) - (268) (991)
Foreign exchange gain (loss)
and other 236 621 (99) 541 1,299
- ----------------------------------------------------------------------------------------
Net (loss) income $ (409) $ 405 $ (99) $ (2,948) $(3,051)
========================================================================================

Investing activities
Property, plant and equipment
expenditures $ 1,967 $ 2,515 $4,977 $ - $ 9,459
Deferred stripping expenditures 12,129 - - - 12,129


For the year ended December 31, 2001, all activity was in the Corporate and
Other segment.


================================================================================
F-33

18. 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 United
States Securities and Exchange Commission for the years ended December 31,
2003, 2002 and 2001.

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

CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31, 2003 AND 2002



Property, Deferred
Plant and Stripping Accounts Other Share Contributed
Equipment Costs Payable Liabilities Capital Surplus Deficit
----------- ----------- ---------- ------------ --------- ------------ ---------

As at December 31, 2003,
Canadian GAAP $ 38,519 $ 24,033 $ 5,848 $ - $120,624 $ 7,172 $(46,137)

Convertible debenture (b) - - - - - 20,675 (20,675)
Share-based
compensation (c) - - - - - 4,343 (4,343)
Gold hedge loss (d) - - (551) 5,911 - - (5,360)
Impairment of property,
plant and equipment,
capitalized deferred
stripping costs and
change in depreciation
and amortization (e) (5,543) (8,740) - - - - (14,283)
Flow-through common
shares (f) - - - - (238) - 238
Black Fox development
costs (g) (3,643) - - - - - (3,643)
- -----------------------------------------------------------------------------------------------------------------
As at December 31, 2003,
U.S. GAAP $ 29,333 $ 15,293 $ 5,297 $ 5,911 $120,386 $ 32,190 $(94,203)
=================================================================================================================



================================================================================
F-34



18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)

Property, Deferred
Restricted Plant and Stripping Other Share Contributed
Cash Cash Equipment Costs Liabilities Capital Surplus Deficit
------------ ---------- ----------- -------- ------------ ------------- -------- ---------

As at December 31, 2002,
Canadian GAAP $ 8,426 $ - $ 30,375 $16,998 $ - $ 72,206 $ 7,023 $(43,951)

Convertible debenture (b) - - - - - - 20,675 (20,675)
Share-based compensation (c) - - - - - - 2,604 (2,604)
Gold hedge loss (d) - - - - 2,265 - - (2,265)
Impairment of property,
plant and equipment,
capitalized deferred
stripping costs and change
in depreciation and
amortization (e) - - (5,456) (8,828) - - - (14,284)
Flow-through common
shares (f) (2,845) 2,845 - - 238 (238) - -
- --------------------------------------------------------------------------------------------------------------------------------
As at December 31, 2002,
U.S. GAAP $ 5,581 $ 2,845 $ 24,919 $ 8,170 $ 2,503 $ 71,968 $ 30,302 $(83,779)
================================================================================================================================


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



2003 2002 2001
--------- --------- -------

Net loss for the year ended December 31,
based on Canadian GAAP $ (2,186) $ (3,051) $ (454)
Marketable securities (a) - - (54)
Convertible debenture (b) - (20,675) -
Share-based compensation (c) (1,739) (2,604) -
Gold hedge loss (d) (3,095) (2,265) -
Impairment of property, plant and equipment and
change in depreciation (e) (87) (5,456) -
Impairment of capitalized deferred stripping costs
and change in amortization (e) 88 (8,828) -
Flow-through shares premium paid in excess
of market value (f) 238 - -
Black Fox development costs (g) (3,643) - -
- ----------------------------------------------------------------------------------
Net loss for the year based on U.S. GAAP $(10,424) $(42,879) $ (508)
==================================================================================
Comprehensive loss $(10,424) $(42,879) $ (508)
==================================================================================
Net loss per share - U.S. GAAP - basic and diluted $ (0.19) $ (2.22) $(0.61)
==================================================================================



================================================================================
F-35

18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)

(a) Marketable securities

In accordance with Canadian GAAP, the Company's marketable securities
are carried at the lower of cost and quoted market values. Under U.S.
GAAP, these investments would be considered as trading securities and
marked to market, with unrealized gains and losses included in the
Consolidated Statement of Operations. The related securities were sold
in fiscal 2001.

(b) Convertible debenture

Under Canadian GAAP, the convertible debenture was recorded as an
equity instrument on issuance in March 2002. Under U.S. GAAP, on
issuance, the convertible debenture would have been recorded as a
liability and reclassified to equity only upon conversion. Further,
under U.S. GAAP, the beneficial conversion feature represented by the
excess of the fair value of the shares and warrants issuable on
conversion of the debenture, measured on the commitment date, over the
amount of the proceeds to be allocated to the common shares and
warrants upon conversion, would be allocated to contributed surplus.
This results in a discount on the debenture that is recognized as
additional interest expense over the term of the debenture and any
unamortized balance is expensed immediately upon conversion of the
debenture. Accordingly, for U.S. GAAP purposes, the Company has
recognized a beneficial conversion feature and debenture issuance
costs of $20,675 in the year ended December 31, 2002. Canadian GAAP
does not require the recognition of any beneficial conversion feature.

(c) Share-based compensation

In accordance with Canadian GAAP, the Company has not recorded any
expense with respect to stock options granted to employees. Under U.S.
GAAP, the Company has elected to continue to measure its employee
stock-based awards using the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25 "Accounting for Stock
Issued to Employees" ("APB No. 25").

Beginning in the first quarter of 2004, the Company will expense stock
options in the financial statements as a component of compensation
expense in accordance with SFAS 148 "Accounting for Stock-Based
Compensation - Transition and Disclosure." This method of accounting
will be similar to the method under Canadian GAAP as disclosed in Note
2 (p) and, as such, no difference will arise.

In fiscal 2003, an expense of $1,739 has been recorded under APB No.
25 with respect to the intrinsic value of stock options granted in the
year and in fiscal 2002, an expense of $2,604 has been recorded under
APB No. 25. In addition, under APB No. 25, the performance shares
granted during 2002 are accounted for as variable awards until the
performance targets are met.


================================================================================
F-36

18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)

(d) Gold hedge loss

Under Canadian GAAP, gains or losses on spot deferred forward
contracts are recognized as an adjustment of revenue in the period
when the originally designated production is sold. Under U.S. GAAP,
SFAS 133 requires that for hedge accounting to be achieved, a company
must provide detailed documentation and must specifically designate
the effectiveness of a hedge. Furthermore, U.S. GAAP also requires
fair value accounting to be used for all types of derivatives. As the
Company has chosen not to meet these requirements for U.S. GAAP
purposes, a charge of $2,265 has been recorded in the fourth quarter
of fiscal 2002 to reflect the fair value loss on the contracts
outstanding at December 31, 2002, and an additional loss of $3,095 has
been recorded in the year ended December 31, 2003 to reflect the fair
value loss on the contracts between December 31, 2002 and 2003. The
gold hedge loss on outstanding hedge contracts amounted to $5,911 and
$2,265 at December 31, 2003 and 2002, respectively.

(e) Impairment of property, plant and equipment and capitalized deferred
stripping costs

Under Canadian GAAP, write-downs for impairment of property, plant and
equipment and capitalized deferred stripping costs are determined
using current proven and probable reserves and mineral resources
expected to be converted into mineral reserves. Under U.S. GAAP,
write-downs are determined using current proven and probable reserves.
In addition, under U.S. GAAP, future cash flows from impaired
properties are discounted. Accordingly, for U.S. GAAP purposes, a
reduction in property, plant and equipment and capitalized deferred
stripping costs of $14,284 has been recorded as an impairment. This
write-down has resulted in an adjustment of depreciation and
amortization expense for U.S. GAAP purposes, upon recommencement of
commercial production at the Montana Tunnels Mine in April 2003, of
$14,283 at December 31, 2003.

(f) 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. For U.S.
GAAP, the premium paid in excess of the market value of $238 is
credited to other liabilities and included in income as the qualifying
expenditures are made.


================================================================================
F-37

18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)

(f) Flow-through common shares (continued)

Also, notwithstanding whether there is a specific requirement to
segregate the funds, the flow-through funds which are unexpended at
the consolidated balance sheet dates are considered to be restricted
and are not considered to be cash or cash equivalents under U.S. GAAP.

As at December 31, 2003, unexpended flow-through funds were $Nil
(December 31, 2002 - $2,845).

(g) 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 $3,643 has been recorded as at
December 31, 2003.

(h) Statement of Cash Flows

Under Canadian GAAP, expenditures incurred for deferred stripping
costs are included in cash flows from investing activities in the
consolidated statement of cash flows. Under U.S. GAAP, these
expenditures are included in cash flows from operating activities.
Accordingly, under U.S. GAAP, the consolidated statement of cash flows
for the year ended December 31, 2003 and 2002 would reflect a
reduction in cash utilized in investing activities of $8,734 and
$12,129, respectively, and a corresponding increase in cash utilized
in operating activities.

(i) Comprehensive income

Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income" ("SFAS 130") establishes standards
for the reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. SFAS
130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported
in a financial statement. For the Company, the only component of
comprehensive loss is the net loss for the period.


F-38

18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)

(j) Supplemental information for U.S. GAAP purposes on stock-based
compensation

Pro forma information regarding net loss and net loss per share is
required by SFAS No. 123 "Accounting for Stock-Based Compensation" and
has been determined as if the Company had accounted for its employees
stock options under the fair value method. The fair value for these
options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions:

2003 2002 2001
------ ------ -----

Risk free interest rate 3.534% 3.550% 0%
Dividend yield 0% 0% 0%
Volatility 75% 92% 0%
Expected life in years 5.0 2.0 -

The weighted average fair value per share of options granted during
2003, 2002 and 2001 was $1.40, $1.58 and $Nil, respectively, and the
expense is amortized over the vesting period.

The following table presents the net loss and net loss per share,
under U.S. GAAP, as if the Company had recorded compensation expense
under SFAS No. 123 with the estimated fair value of the options being
amortized to expense over the options' vesting period.



2003 2002 2001
--------- --------- -------

Net loss for the year based on U.S. GAAP $(10,424) $(42,879) $ (508)
Stock option expense as reported 2,115 3,219 -
Pro forma stock option expense (4,247) (2,595) (1)
- -----------------------------------------------------------------------
Net loss - pro forma $(12,556) $(42,255) $ (509)
=======================================================================

Net loss per share, basic and diluted -
based on U.S. GAAP $ (0.19) $ (2.22) $(0.61)
Stock option expense as reported 0.04 0.17 -
Pro forma stock option expense (0.08) (0.14) -
- -----------------------------------------------------------------------
Net loss per share, basic and
and diluted - pro forma $ (0.23) $ (2.19) $(0.61)
=======================================================================



================================================================================
F-39

18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)

(k) Recently issued accounting pronouncements

In November 2002, the Financial Accounting Standards Board ("FASB")
issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others". FIN 45 requires that upon
issuance of a guarantee, a guarantor must recognize a liability for
the fair value of an obligation assumed under a guarantee. FIN 45 also
requires additional disclosures by a guarantor in its interim and
annual financial statements about the obligations associated with
guarantees issued. The disclosure requirements of FIN 45 were
effective for financial statements for period ending after December
15, 2002. The Company adopted the disclosure requirements of FIN 45 in
fiscal 2002. The initial recognition and measurement provisions of FIN
45 are effective for any guarantees that are issued or modified after
December 31, 2002. The Company adopted the recognition and measurement
requirements of FIN 45 in fiscal 2003, which had no material impact on
its results of operations, financial position or liquidity.

In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities", an Interpretation of
ARB No. 51. FIN 46 requires certain variable interest entities to be
consolidated by the primary beneficiary of the entity if the equity
investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at
risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective
for all new variable interest entities created or acquired after
January 31, 2003. For variable interest entities created or acquired
prior to February 1, 2003, the provisions of FIN 46 must be applied
for the first interim or annual period beginning after December 15,
2003 however, earlier adoption is permitted. The Company adopted FIN
46 on July 1, 2003. Adoption of this standard did not have a material
effect on the Company's results of operations, financial position or
disclosures.

In April 2003, SFAS No. 149, "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities," was issued. In general, this
statement amends and clarifies accounting for derivative instruments,
including certain derivative instruments embedded in other contracts,
and for hedging activities under SFAS No. 133. The Company adopted
SFAS No. 149 on July 1, 2003. Adoption of this standard did not have a
material impact on the Company's financial position or disclosures.

In May 2003, SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", was
issued. In general this statement requires that those instruments be
classified as liabilities rather than equity on the balance sheet. The
Company adopted this standard on July 1, 2003. Adoption of this
standard did not have a material impact on the Company's financial
position or disclosures.


================================================================================
F-40

18. DIFFERENCES BETWEEN CANADIAN AND U.S. GAAP (CONTINUED)

(k) Recently issued accounting pronouncements (continued)

CICA Handbook Sections 3063 - "Impairment of Long Lived Assets" and
3475 - "Disposal of Long Lived Assets and Discontinued Operations"
were amended to harmonize with SFAS 144. The standards will require an
impairment loss to be recognized when the carrying amount of an asset
held for use exceeds the sum of the undiscounted cash flows. The
impairment loss would be measured as the amount by which the carrying
amount exceeds the fair value of the asset. An asset held for sale is
to be measured at the lower of carrying cost or fair value less cost
to sell. In addition, this guidance broadens the concept of a
discontinued operation and eliminates the ability to accrue operating
losses expected between the measurement date and the disposal date.
Section 3063 is effective for fiscal years beginning on or after April
1, 2003 and Section 3475 applies to disposal activities initiated by
an enterprise's commitment to a plan on or after May 1, 2003. The
Company will adopt this new standard in its 2004 financial statements.

CICA Handbook Section 3475 - "Disposal of Long Lived Assets and
Discontinued Operations" establishes standards for the recognition,
measurement, presentation and disclosure of the disposal of long lived
assets. It also establishes standards for the presentation and
disclosure of discontinued operations, whether or not they include
long-lived assets. The new recommendations apply to disposal
activities initiated by an enterprise's commitment to a plan on or
after May 1, 2003. As at December 31, 2003, the Company does not have
any long lived assets subject to disposal in accordance with these new
standards.

The CICA issued Accounting Guideline 13, AcG-13, "Hedging
Relationships", which requires that in order to apply hedge
accounting, all hedging relationships must be identified, designated,
documented and effective. Where hedging relationships cannot meet
these requirements, hedge accounting must be discontinued. AcG-13 is
applicable for fiscal years beginning on or after July 1, 2003. The
provisions of this recently issued accounting pronouncement are
currently being assessed by management.

The CICA issued Accounting Guideline 14, AcG-14, "Disclosures of
Guarantees" which elaborates on the disclosures to be made by a
guarantor about its obligations under certain guarantees issued. The
Company adopted the provisions of this guideline in fiscal 2003, which
had no material impact on its results of operations, financial
position or liquidity.

The CICA issued Accounting Guideline 15, "Consolidation of Variable
Interest Entities", which addresses when a company should include in
its financial statements the assets, liabilities and activities of
another entity. Management does not expect the adoption of the new
guideline to have a material impact on its financial statements.


================================================================================
F-41

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Arthur Andersen LLP was Pursuit's independent auditor; however, effective
June 3, 2002, Arthur Andersen LLP, ceased practicing public accounting. Apollo
Gold Corporation engaged Deloitte & Touche LLP as our new independent certified
public accountants effective June 17, 2002. Deloitte & Touche LLP independently
reaudited our historical financial statements and did not rely on any of Arthur
Andersen LLP's work product.

Our Board of Directors, with the recommendation of the Audit Committee of
the Board of Directors and with the approval of our shareholders, authorized and
approved the engagement of Deloitte & Touche LLP. During our two most recent
fiscal years and the subsequent period prior to such appointment, we did not
consult Deloitte & Touche LLP regarding the application of accounting principles
to a specific completed or contemplated transaction, or the type of audit
opinion that might be rendered on our financial statements, nor on any matter
that was either the subject of a disagreement, as that term is defined in Item
304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of
Regulation S-B, or a reportable event, as that term is defined in Item
304(a)(1)(v) of Regulation S-B.

ITEM 9A. CONTROLS AND PROCEDURES.

Within 90 days prior to the date of this report, we carried out an
evaluation, under the supervision and with the participation of our principal
executive officer and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our principal executive officer and principal financial officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information required to be included in our periodic
reports filed with the SEC. It should be noted that the design of any system of
controls is based in part upon certain assumptions about the likelihood of
certain events, and there can be no assurance that any design will succeed in
achieving its stated goals under all future conditions, regardless of how
remote. In addition, we reviewed our internal controls, and there have been no
significant changes in our internal controls or in other factors that could
significantly affect those controls subsequent to the date of their last
evaluation.


PART III

ITEM 10. Directors and Executive Officers of the Registrant

Information with respect to "Directors and Executive Officers of the
Registrant" may be found in our 2004 Proxy Statement for the Annual Meeting of
Shareholders to be held May 20, 2004 (the "Proxy Statement"). The Proxy
Statement will be filed within 120 days after the close of the 2003 fiscal year.
Such information is incorporated herein by reference.


75

ITEM 11. Executive Compensation

Information with respect to "Executive Compensation" may be found in our
2004 Proxy Statement for the Annual Meeting of Shareholders to be held May 20,
2004 (the "Proxy Statement"). The Proxy Statement will be filed within 120 days
after the close of the 2003 fiscal year. Such information is incorporated herein
by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

Information with respect to "Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters" may be found in our 2004
Proxy Statement for the Annual Meeting of Shareholders to be held May 20, 2004
(the "Proxy Statement"). The Proxy Statement will be filed within 120 days after
the close of the 2003 fiscal year. Such information is incorporated herein by
reference.

ITEM 13. Certain Relationships and Related Transactions

Information with respect to "Certain Relationships and Related
Transactions" may be found in our 2004 Proxy Statement for the Annual Meeting of
Shareholders to be held May 20, 2004 (the "Proxy Statement"). The Proxy
Statement will be filed within 120 days after the close of the 2003 fiscal year.
Such information is incorporated herein by reference.

ITEM 14. Principal Accounting Fees and Services

Information with respect to "Principal Accounting Fees and Services" may be
found in our 2004 Proxy Statement for the Annual Meeting of Shareholders to be
held May 20, 2004 (the "Proxy Statement"). The Proxy Statement will be filed
within 120 days after the close of the 2003 fiscal year. Such information is
incorporated herein by reference.


76

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) DOCUMENTS FILED AS PART OF THIS REPORT:

1. Financial Statements. The financial statements of Apollo Gold
Corporation are included in a separate section of this Annual Report on Form
10-K.

2. Financial Statement Schedules. The financial statement schedules of
Apollo Gold Corporation have been omitted because they are not applicable, not
required, or the information is included in the consolidated financial
statements or notes thereto.


77

3. Exhibits. The following Exhibits are attached hereto and
incorporated herein by reference:



Exhibit No. Exhibit Name
- ----------- ------------


1.1 Agency Agreement dated as of September 19, 2003, by and among Apollo Gold
Corporation, BMO Nesbitt Burns Inc., Canaccord Capital Corporation, Griffiths
McBurney & Partners, Orion Securities Inc. and Westwind Partners Inc. (2)

2.1 Merger Agreement dated as of January 31, 2002, by and among Nevoro Gold
Corporation, Nevoro Gold USA, Inc. and Apollo Gold Corporation. (1)

2.2 International Pursuit Corporation and Nevoro Gold Corporation Arrangement
Agreement dated May 13, 2002. (1)

2.3 Purchase Agreement dated May 30, 2003 by and between Exall Resources
Limited, Glimmer Resources, Inc. and International Pursuit Corporation. (1)

2.3(a) Amendment Agreement dated as of September 5, 2002, by and between Exall
Resources Limited, Glimmer Resources, Inc. and Apollo Gold Corporation. (1)

3.1 Letters Patent of the Registrant Brownlee Mines (1936) Limited from the
Province of Ontario dated June 30, 1936. (1)

3.2 Supplementary Letters Patent of the Registrant from the Province of Ontario
dated June 5, 1946. (1)

3.3 Change of name of the Registrant from Brownlee Mines (1936) Limited to
Juliet-Quebec Mines, Limited dated January 7, 1939 from the Province of
Ontario. (1)

3.4 Supplementary Letters Patent of the Registrant dated July 5, 1944, from the
Province of Ontario. (1)

3.5 Certificate of Amendment of Articles of the Registrant effective July 20, 1972.
(1)

3.6 Certificate of Amendment of Articles of the Registrant effective on November
28, 1975. (1)

3.7 Certificate of Amendment of Articles of the Registrant effective on August 14,
1978. (change of name to J-Q Resources Inc.) (1)

3.8 Certificate of Articles of Amendment of the Registrant effective on July 15,
1983. (1)

3.9 Certificate of Articles of Amendment of the Registrant effective July 7, 1986. (1)


78

3.10 Certificate of Articles of Amendment of the Registrant effective August 6, 1987
(change of name to International Pursuit Corporation) (1)

3.11 Certificate of Articles of Arrangement of the Registrant effective June 25, 2002
(change of name to Apollo Gold Corporation). (1)

3.12 Certificate of Continuance filed May 28, 2003 (1)

3.13 By-Laws of the Registrant, as amended to date. (1)

4.1 Sample Certificate of Common Shares of the Registrant. (1)

4.2 See Exhibits 3.1 through 3.11. (1)

4.3 Form of Convertible Secured Debenture dated March 20, 2002, by and among
Registrant and certain investors. (1)

4.4 Form of Special Warrant dated September 13, 2002, by and among Registrant
and certain investors. (1)

4.5 Registration Rights Agreement dated September 13, 2002 by and among
Registrant and BMO Nesbitt Burns Inc., acting on behalf of and for the benefit
of each of the holders. (1)

4.6 Form of Special Warrants Purchase Agreement dated September 13, 2002, by
and among Registrant and certain investors. (1)

4.7 Form of Subscription and Renunciation Agreement dated November 21, 2002,
by and among Registrant and certain investors. (1)

4.8 Form of Unit Purchase Agreement dated December 23, 2002, by and among
Registrant and certain investors. (1)

4.9 Form of Warrant Agreement dated December 23, 2002, by and among Registrant
and certain investors. (1)

4.10 Registration Rights Agreement dated December 23, 2002, by and among
Registrant and BMO Nesbitt Burns Inc., acting on behalf of and for the benefit
of each of the holders. (1)

4.11 Form of Subscription Agreement dated December 23, 2002, by and among
Registrant and certain investors. (1)

4.12 Form of Subscription Agreement dated September 26, 2003, by and among
Registrant and certain investors. (2)

4.13 Registration Rights Agreement dated September 26, 2003, by and among
Registrant and BMO Nesbitt Burns Inc., acting on behalf of and for the benefit
of each of the holders. (2)


79

10.1 Amended and Restated Employment agreement dated May, 2003, by and
between Apollo Gold Corporation and R. David Russell, President and Chief
Executive Officer. (1)

10.2 Amended and Restated Employment agreement dated May, 2003, by and
between Apollo Gold Corporation and Richard F. Nanna, Vice-President,
Exploration. (1)

10.3 Amended and Restated Employment agreement dated May, 2003, by and
between Apollo Gold Corporation and Donald W. Vagstad, Vice-President,
General Counsel and Secretary. (1)

10.4 Amended and Restated Employment agreement dated May, 2003, by and
between Apollo Gold Corporation and David K. Young, Vice-President,
Business Development. (1)

10.5 Amended and Restated Employment agreement dated May, 2003, by and
between Apollo Gold Corporation and R. Llee Chapman, Vice-President, Chief
Financial Officer. (1)

10.6 Separation of Employment and General Release Agreement dated January 14,
2003, by and between Apollo Gold Corporation and Donald S. Robson. (1)

10.7 Apollo Gold Corporation Plan of Arrangement Stock Option Incentive Plan. (1)

10.8 Apollo Gold Corporation Stock Option Incentive Plan. (1)

10.9 Form of Stock Option Agreement used for Apollo Gold Corporation Stock
Option Incentive Plan. (1)

10.10 Sublease Agreement dated July 18, 2002 by and between Texaco, Inc., a
Delaware Corporation and Apollo Gold, Inc. (1)

10.10(a) First Amendment dated February 21, 2003 to Sublease Agreement. (1)

10.11 Term Bonding Agreement dated August 1, 2002 among National Fire Insurance
Company of Hartford, Apollo Gold Corporation, Apollo Gold, Inc. and
Montana Tunnels Mining, Inc. (1)

10.12 Apollo Gold, Inc. and Affiliated Companies Company Retirement Plan
(Employee Savings Plan). (1)

10.13 Installment Sales Contract between Florida Canyon Mining, Inc. and Caterpillar
Financial Services Corporation dated January 9, 2002. (1)

10.13(a) Second Installment Sales Contract between Florida Canyon Mining, Inc. and
Caterpillar Financial Services Corporation dated January 9, 2002. (1)

10.13(b) Finance Lease between Florida Canyon Mining and Caterpillar Financial
Services Corporation dated as of August 23, 2002. (1)


80

10.13(c) Security Agreement and Promissory Note between Apollo Gold, Inc. and
Caterpillar Financial Services Corporation dated October 9, 2002. (114 Master
Lease Agreement dated December 28, 1995 between Atel Leasing Corporation
and Pegasus Gold Corporation. (1)

10.14(a) Second Amendment to Lease Supplement No.1 To Master Lease Agreement No.
PEGA1. (1)

10.15 Montana Tunnels Zinc Concentrate Agreement by and between Teck Cominco
Metals LTD and Apollo Gold Corporation dated October 1, 2002 (Agreement
ZN 48-2002-08). (1)

10.16 Montana Tunnels Lead Concentrate Agreement by and between Teck Cominco
Metals LTD and Apollo Gold Corporation dated October 1, 2002 (Agreement
ZN 48-2002-15). (1)

10.17 Revolving Loan, Guaranty and Security Agreement by and between Apollo
Gold, Inc. and Standard Bank London limited dated June 25, 2003. (1)

10.18 Form of Indemnification Agreement between Apollo Gold Corporation and its
officers and directors.

10.19 Form of Indemnification Agreement between Apollo Gold Corporation
subsidiaries and their respective officers and directors.

21.1 List of subsidiaries of the Registrant. (1)

23.1 Consent of Deloitte & Touche LLP

31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-
Oxey Act.

31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-
Oxey Act.

32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-
Oxey Act.

32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-
Oxey Act.

99.1 Location of Florida Canyon Mine. (1)

99.2 Location of Montana Tunnels Mine. (1)


(1) Incorporated by reference to the Registration Statement on Form 10 (File No. 001-31593)

(2) Incorporated by reference to the Registration Statement on Form S-1 (File No. 333-109511)



81

(b) REPORTS ON FORM 8-K.

On November 17, 2003, Apollo Gold Corporation issued a press release announcing
its results of operations for the third quarter ended September 30, 2003. The
full text of the press release was set forth in our Form 8-K filed on November
17, 2003.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

APOLLO GOLD CORPORATION

/s/ R. David Russell
- -----------------------
R. David Russell, President and Chief Executive Officer

March 30, 2004

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.


SIGNATURE TITLE DATE
- --------- ----- ----

/s/ R. David Russell President and March 30, 2004
- ----------------------- Chief Executive Officer and
R. David Russell a Director


/s/ G.W. Thompson Chairman of the Board of March 30, 2004
- ----------------------- Directors and a Director
G.W. Thompson


/s/ R. Llee Chapman l Vice President, Chief March 30, 2004
- ----------------------- Financial Officer, Treasurer
R. Llee Chapman & Controller


/s/ G. Michael Hobart Assistant Secretary and March 30, 2004
- ----------------------- a Director
Michael Hobart


/s/ Charles E. Stott Director March 30, 2004
- -----------------------
Charles E. Stott


/s/ Robert A. Watts Director March 30, 2004
- -----------------------
Robert A. Watts


/s/ W.S. Vaughan Director March 30, 2004
- -----------------------
W.S. Vaughan


/s/ Gerald J. Schissler Director March 30, 2004
- ------------------------
Gerald J. Schissler


82