Unassociated Document
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
R QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the
quarterly period ended June 30, 2009
OR
£ TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Commission
File Number: 001-31593
APOLLO
GOLD CORPORATION
(Exact
name of registrant as specified in its charter)
Yukon
Territory, Canada
|
Not
Applicable
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer Identification No.)
|
5655
South Yosemite St., Suite 200
Greenwood
Village, Colorado 80111-3220
(Address
of principal executive offices) (Zip code)
Registrant’s
telephone number, including area code: (720) 886-9656
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes R No
£
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes £ No
£
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See definitions of “large accelerated filer,” and
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.:
Large
Accelerated Filer £
|
Accelerated
Filer £
|
Non-Accelerated
Filer £ (do not
check if a smaller
reporting
company)
|
Smaller
Reporting Company R
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes £ No
R
At August
11, 2009, there were 261,422,224 common shares of Apollo Gold Corporation
outstanding.
TABLE
OF CONTENTS
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Page
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PART I FINANCIAL
INFORMATION |
4
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4
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5
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9
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38
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46
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47
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PART II OTHER
INFORMATION |
47
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47
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48
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48
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48
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48
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49
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49
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51
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Certification
of CEO Pursuant to Section 302
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Exhibit 31.1
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Certification
of CFO Pursuant to Section 302
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Exhibit 31.2
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Certification
of CEO and CFO Pursuant to Section 906
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Exhibit 32.1
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STATEMENTS
REGARDING FORWARD LOOKING INFORMATION
This
Quarterly Report on Form 10-Q contains forward looking statements as defined in
the Private Securities
Litigation Reform Act of 1995 with respect to our financial condition,
results of operations, business prospects, plans, objectives, goals, strategies,
future events, capital expenditures, and exploration and development
efforts. Forward-looking statements can be identified by the use of
words such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “intends,” “continue,” or the negative of such terms,
or other comparable terminology. These statements include comments
regarding:
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·
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plans
for the development of and production at the Black Fox project including,
without limitation, the timing of the development of the underground mine
at Black Fox;
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·
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estimates
of future production at Black Fox;
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·
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our
ability to reschedule quarterly principal payments under the Black Fox
project finance facility;
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·
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our
ability to meet our repayment obligations under the Black Fox project
finance facility;
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·
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plans
for and our ability to finance exploration at our Huizopa and Grey Fox
properties;
|
|
·
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our
ability to repay the convertible debentures issued to RAB Special
Situations (Master) Fund Limited (“RAB”) due February 23,
2010;
|
|
·
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the
future effect of recent issuances and registration for immediate resale of
a significant number of common share purchase warrants on our share
price;
|
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·
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future
financing of projects, without limitation, including the financing
required for the M Pit expansion at Montana
Tunnels;
|
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·
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costs
associated with placing the Montana Tunnels mine and mill on care and
maintenance and the decision to undertake the M Pit
expansion;
|
|
·
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liquidity
to support operations and debt
repayment;
|
|
·
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the
establishment and estimates of mineral reserves and
resources;
|
|
·
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daily
production, mineral recovery rates and mill throughput
rates;
|
|
·
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total
production costs;
|
|
·
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grade
of ore mined and milled from Black Fox and cash flows derived
therefrom;
|
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·
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anticipated
expenditures for development, exploration, and corporate
overhead;
|
|
·
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timing
and issue of permits, including permits necessary to conduct phase II of
open pit mining at Black Fox;
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·
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expansion
plans for existing properties;
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·
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estimates
of closure costs and reclamation
liabilities;
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·
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our
ability to obtain financing to fund our estimated expenditure and capital
requirements;
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·
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factors
impacting our results of operations;
and
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·
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the
impact of adoption of new accounting
standards.
|
These
forward looking statements are subject to numerous risks, uncertainties and
assumptions including: unexpected changes in business and economic
conditions, including the recent significant deterioration in global financial
and capital markets; significant increases or decreases in gold and zinc
prices; changes in interest and currency exchange rates including the LIBOR
rate; timing and amount of production; unanticipated changes in grade of ore;
unanticipated recovery or production problems; changes in operating costs;
operational problems at our mining properties; metallurgy, processing, access,
availability of materials, equipment, supplies and water; determination of
reserves; costs and timing of development of new reserves; results of current
and future exploration and development activities; results of current and future
exploration activities; results of future feasibility studies; joint venture
relationships; political or economic instability, either globally or in the
countries in which we operate; local and community impacts and issues; timing of
receipt of government approvals; accidents and labor disputes; environmental
costs and risks; competitive factors, including competition for property
acquisitions; availability of external financing at reasonable rates or at all;
and the factors discussed in our Annual Report on Form 10-K for the year ended
December 31, 2008 under the heading “Risk Factors.” Many of these
factors are beyond our ability to control and predict. These factors
are not intended to represent a complete list of the general or specific factors
that may affect us. We disclaim any obligation to update forward
looking statements, whether as a result of new information, future events or
otherwise.
ACCOUNTING
PRINCIPLES, REPORTING CURRENCY AND OTHER INFORMATION
Apollo
Gold Corporation prepares its consolidated financial statements in accordance
with accounting principles generally accepted in Canada and publishes its
financial statements in United States dollars. This Quarterly Report
on Form 10-Q should be read in conjunction with our condensed consolidated
financial statements and related notes included in this quarterly report, as
well as our annual financial statements for the fiscal year ended
December 31, 2008 included in our Annual Report on Form
10-K. Certain prior period figures have been reclassified to conform
to the current period presentation. In particular, for the three and
six months ended June 30, 2008, $1.4 million and $2.0 million, respectively,
that were recorded as cash inflows from investing activities have been
reclassified to operating activities in connection with proceeds from the sale
of derivative contracts.
Unless
stated otherwise, all dollar amounts are expressed in United States
dollars.
References
to “we,” “our,” “us,” the “Company” or “Apollo” mean Apollo Gold Corporation and
its consolidated subsidiaries, or to any one or more of them, as the context
requires.
NON-GAAP
FINANCIAL INFORMATION
In this
Quarterly Report on Form 10-Q, Apollo uses the terms “cash operating costs,”
“total cash costs” and “total production costs,” each of which are considered
non-GAAP financial measures as defined in the United States Securities and
Exchange Commission Regulation S-K Item 10 and should not be considered in
isolation or as a substitute for measures of performance prepared in accordance
with U.S. GAAP. These terms are used by management to assess
performance of individual operations and to compare Apollo’s performance to
other gold producers.
The term
“cash operating costs” is used on a per ounce of gold basis. Cash
operating costs per ounce is equivalent to direct operating cost, as found on
the Consolidated Statements of Operations, less production royalty expenses and
mining taxes but includes by-product credits for payable silver, lead and
zinc.
The term
“total cash costs” is equivalent to cash operating costs plus production
royalties and mining taxes.
The term
“total production costs” is equivalent to total cash costs plus non-cash costs
including depreciation and amortization.
This
information differs from measures of performance determined in accordance with
generally accepted accounting principles (GAAP) in Canada and the United States
and should not be considered in isolation or a substitute for measures of
performance prepared in accordance with GAAP. These measures are not
necessarily indicative of operating profit or cash flow from operations as
determined under GAAP and may not be comparable to similarly titled measures of
other companies. See Item 2, Management’s Discussion and Analysis of
Financial Condition and Results of Operations, for a reconciliation of these
non-GAAP measures to our Statements of Operations.
These
condensed consolidated financial statements should be read in conjunction with
the financial statements, accompanying notes and other relevant information
included in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008 filed with the Securities and Exchange Commission on
March 27, 2009.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In
thousands of U.S. dollars)
(Unaudited)
|
|
|
|
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|
ASSETS
|
|
|
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CURRENT
|
|
|
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Cash
and cash equivalents
|
|
$ |
1,834 |
|
|
$ |
3,097 |
|
Restricted
cash
|
|
|
4,499 |
|
|
|
10,000 |
|
Accounts
receivable and other
|
|
|
3,062 |
|
|
|
3,134 |
|
Derivative
instruments (Note 5)
|
|
|
469 |
|
|
|
552 |
|
Prepaids
|
|
|
697 |
|
|
|
546 |
|
Inventories
(Note 6)
|
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|
7,733 |
|
|
|
4,154 |
|
Total
current assets
|
|
|
18,294 |
|
|
|
21,483 |
|
Derivative
instruments (Note 5)
|
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|
1,773 |
|
|
|
– |
|
Long-term
investments (Note 7)
|
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|
1,094 |
|
|
|
1,081 |
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Property,
plant and equipment
|
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|
137,533 |
|
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|
95,881 |
|
Deferred
stripping costs
|
|
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– |
|
|
|
1,052 |
|
Restricted
certificates of deposit
|
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|
21,590 |
|
|
|
12,030 |
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Other
long-term assets
|
|
|
107 |
|
|
|
103 |
|
TOTAL
ASSETS
|
|
$ |
180,391 |
|
|
$ |
131,630 |
|
LIABILITIES
|
|
|
|
|
|
|
|
|
CURRENT
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
11,482 |
|
|
$ |
13,827 |
|
Accrued
liabilities
|
|
|
1,861 |
|
|
|
1,449 |
|
Property
and mining taxes payable
|
|
|
883 |
|
|
|
1,146 |
|
Derivative
instruments (Note 5 and Note 8(b))
|
|
|
3,708 |
|
|
|
– |
|
Current
portion of debt (Note 8(a))
|
|
|
22,798 |
|
|
|
20,636 |
|
Convertible
debentures
|
|
|
4,138 |
|
|
|
3,356 |
|
Total
current liabilities
|
|
|
44,870 |
|
|
|
40,414 |
|
Accrued
long-term liabilities
|
|
|
330 |
|
|
|
316 |
|
Derivative
instruments (Note 5 and Note 8(b))
|
|
|
13,024 |
|
|
|
– |
|
Debt
(Note 8(a))
|
|
|
44,411 |
|
|
|
1,012 |
|
Convertible
debentures
|
|
|
– |
|
|
|
4,571 |
|
Accrued
site closure costs
|
|
|
14,079 |
|
|
|
10,563 |
|
Future
income tax liability
|
|
|
393 |
|
|
|
447 |
|
Deferred
gain (Note 4)
|
|
|
– |
|
|
|
552 |
|
TOTAL
LIABILITIES
|
|
|
117,107 |
|
|
|
57,875 |
|
|
|
|
|
|
|
|
|
|
Continuing
operations (Note 1)
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 11)
|
|
|
|
|
|
|
|
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|
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|
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|
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|
SHAREHOLDERS’
EQUITY
|
|
|
|
|
|
|
|
|
Share
capital (Note 10)
|
|
|
191,914 |
|
|
|
188,927 |
|
Equity
component of convertible debentures
|
|
|
584 |
|
|
|
1,987 |
|
Debenture
note warrants
|
|
|
– |
|
|
|
2,234 |
|
Contributed
surplus
|
|
|
35,349 |
|
|
|
21,683 |
|
Deficit
|
|
|
(164,563 |
) |
|
|
(141,076 |
) |
TOTAL
SHAREHOLDERS’ EQUITY
|
|
|
63,284 |
|
|
|
73,755 |
|
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$ |
180,391 |
|
|
$ |
131,630 |
|
The
accompanying notes are an integral part of these interim condensed consolidated
financial statements.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)
(U.S.
dollars and shares in thousands, except per share amounts)
(Unaudited)
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from sale of minerals
|
|
$ |
7,558 |
|
|
$ |
10,019 |
|
|
$ |
14,928 |
|
|
$ |
25,921 |
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
operating costs
|
|
|
5,044 |
|
|
|
9,469 |
|
|
|
13,447 |
|
|
|
18,530 |
|
Depreciation
and amortization
|
|
|
1,417 |
|
|
|
355 |
|
|
|
1,728 |
|
|
|
759 |
|
General
and administrative expenses
|
|
|
1,096 |
|
|
|
1,159 |
|
|
|
2,028 |
|
|
|
2,088 |
|
Accretion
expense – accrued site closure costs
|
|
|
250 |
|
|
|
178 |
|
|
|
431 |
|
|
|
355 |
|
Amortization
of deferred gain
|
|
|
(97 |
) |
|
|
(369 |
) |
|
|
(552 |
) |
|
|
(924 |
) |
Exploration
and business development
|
|
|
302 |
|
|
|
1,001 |
|
|
|
529 |
|
|
|
1,757 |
|
|
|
|
8,012 |
|
|
|
11,793 |
|
|
|
17,611 |
|
|
|
22,565 |
|
Operating
(loss) income
|
|
|
(454 |
) |
|
|
(1,774 |
) |
|
|
(2,683 |
) |
|
|
3,356 |
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
38 |
|
|
|
83 |
|
|
|
85 |
|
|
|
209 |
|
Interest
expense (Note 8)
|
|
|
(1,434 |
) |
|
|
(1,021 |
) |
|
|
(2,461 |
) |
|
|
(2,169 |
) |
Debt
transaction costs (Note 8(a) and (c))
|
|
|
(10 |
) |
|
|
– |
|
|
|
(1,821 |
) |
|
|
– |
|
Loss
on modification of debentures (Note 9)
|
|
|
– |
|
|
|
– |
|
|
|
(1,969 |
) |
|
|
– |
|
Realized
(losses) gains on derivative contracts
|
|
|
(492 |
) |
|
|
1,432 |
|
|
|
(124 |
) |
|
|
1,950 |
|
Unrealized
(losses) gains on derivative contracts
|
|
|
3,376 |
|
|
|
122 |
|
|
|
(15,042 |
) |
|
|
(733 |
) |
Foreign
exchange gain (loss) and other
|
|
|
242 |
|
|
|
(108 |
) |
|
|
339 |
|
|
|
(225 |
) |
Income
(loss) before income taxes
|
|
|
1,266 |
|
|
|
(1,266 |
) |
|
|
(23,676 |
) |
|
|
2,388 |
|
Income
taxes (Note 12)
|
|
|
– |
|
|
|
(63 |
) |
|
|
189 |
|
|
|
(63 |
) |
Net
income (loss) and comprehensive income (loss) income for the
period
|
|
$ |
1,266 |
|
|
$ |
(1,329 |
) |
|
$ |
(23,487 |
) |
|
$ |
2,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income (loss) per share (Note 10)
|
|
$ |
0.01 |
|
|
$ |
(0.01 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.01 |
|
Diluted
net income (loss) per share (Note 10)
|
|
$ |
0.00 |
|
|
$ |
(0.01 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted-average number of shares outstanding
|
|
|
234,162 |
|
|
|
161,169 |
|
|
|
230,453 |
|
|
|
160,252 |
|
Diluted
weighted-average number of shares
|
|
|
289,454 |
|
|
|
161,169 |
|
|
|
230,453 |
|
|
|
165,885 |
|
The
accompanying notes are an integral part of these interim condensed consolidated
financial statements.
CONDENSED
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(U.S.
dollars and shares in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
Equity
Component
of
Convertible
Debentures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(U.S. dollars and shares in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2007
|
|
|
156,248 |
|
|
$ |
166,424 |
|
|
$ |
2,238 |
|
|
$ |
2,292 |
|
|
$ |
14,591 |
|
|
$ |
(142,672 |
) |
|
$ |
42,873 |
|
Shares
issued for services
|
|
|
650 |
|
|
|
351 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
351 |
|
Units
issued for cash and related compensation warrants
|
|
|
40,806 |
|
|
|
14,885 |
|
|
|
– |
|
|
|
– |
|
|
|
3,247 |
|
|
|
– |
|
|
|
18,132 |
|
Flow-through
shares issued for cash and related compensation warrants
|
|
|
20,000 |
|
|
|
8,028 |
|
|
|
– |
|
|
|
– |
|
|
|
104 |
|
|
|
– |
|
|
|
8,132 |
|
Warrants
issued for services
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
2,907 |
|
|
|
– |
|
|
|
2,907 |
|
Warrants
exercised
|
|
|
3,272 |
|
|
|
1,463 |
|
|
|
– |
|
|
|
(58 |
) |
|
|
(1 |
) |
|
|
– |
|
|
|
1,404 |
|
Conversion
of debentures
|
|
|
1,884 |
|
|
|
834 |
|
|
|
(251 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
583 |
|
Income
tax benefits renounced in connection with issuance of flow-through
shares
|
|
|
– |
|
|
|
(3,058 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(3,058 |
) |
Stock-based
compensation
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
835 |
|
|
|
– |
|
|
|
835 |
|
Net
income and comprehensive income
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,596 |
|
|
|
1,596 |
|
Balance,
December 31, 2008
|
|
|
222,860 |
|
|
|
188,927 |
|
|
|
1,987 |
|
|
|
2,234 |
|
|
|
21,683 |
|
|
|
(141,076 |
) |
|
|
73,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services (Note 10(a)(ii and iii))
|
|
|
5,173 |
|
|
|
1,553 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,553 |
|
Shares
issued in settlement of interest (Note 9)
|
|
|
2,445 |
|
|
|
772 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
772 |
|
Warrants
issued for services (Notes 8(a) and 10(a)(ii and iii))
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
9,089 |
|
|
|
– |
|
|
|
9,089 |
|
Warrants
exercised (Note 10(a)(i))
|
|
|
4,833 |
|
|
|
851 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
851 |
|
Expiration
of note warrants
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(2,234 |
) |
|
|
2,234 |
|
|
|
– |
|
|
|
– |
|
Redemption
of debentures
|
|
|
– |
|
|
|
– |
|
|
|
(1,987 |
) |
|
|
– |
|
|
|
1,987 |
|
|
|
– |
|
|
|
– |
|
Equity
component of convertible debentures (Note 9)
|
|
|
– |
|
|
|
– |
|
|
|
584 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
584 |
|
Income
tax benefits renounced in connection with issuance of flow-through
shares
|
|
|
– |
|
|
|
(189 |
) |
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(189 |
) |
Stock-based
compensation
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
356 |
|
|
|
– |
|
|
|
356 |
|
Net
loss and comprehensive loss
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
(23,487 |
) |
|
|
(23,487 |
) |
Balance,
June 30, 2009
|
|
|
235,311 |
|
|
$ |
191,914 |
|
|
$ |
584 |
|
|
$ |
– |
|
|
$ |
35,349 |
|
|
$ |
(164,563 |
) |
|
$ |
63,284 |
|
The
accompanying notes are an integral part of these interim condensed consolidated
financial statements.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
thousands of U.S. dollars)
(Unaudited)
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) for the period
|
|
$ |
1,266 |
|
|
$ |
(1,329 |
) |
|
$ |
(23,487 |
) |
|
$ |
2,325 |
|
Items
not affecting cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,417 |
|
|
|
355 |
|
|
|
1,728 |
|
|
|
759 |
|
Amortization
of deferred stripping costs
|
|
|
184 |
|
|
|
704 |
|
|
|
1,052 |
|
|
|
1,762 |
|
Stock-based
compensation
|
|
|
174 |
|
|
|
240 |
|
|
|
356 |
|
|
|
382 |
|
Shares
and warrants issued for services and payment of interest
|
|
|
– |
|
|
|
– |
|
|
|
4,020 |
|
|
|
– |
|
Accretion
expense – accrued site closure costs
|
|
|
250 |
|
|
|
178 |
|
|
|
431 |
|
|
|
355 |
|
Interest
expense – amortization of debt discount
|
|
|
469 |
|
|
|
– |
|
|
|
469 |
|
|
|
– |
|
Interest
expense – accretion of convertible debentures
|
|
|
312 |
|
|
|
877 |
|
|
|
1,282 |
|
|
|
1,770 |
|
Interest
paid on convertible debentures
|
|
|
– |
|
|
|
– |
|
|
|
(567 |
) |
|
|
(1,016 |
) |
Amortization
of deferred gain
|
|
|
(97 |
) |
|
|
(369 |
) |
|
|
(552 |
) |
|
|
(924 |
) |
Unrealized
(gains) losses on derivative instruments
|
|
|
(3,376 |
) |
|
|
(122 |
) |
|
|
15,042 |
|
|
|
733 |
|
Foreign
exchange (gain) loss and other
|
|
|
(328 |
) |
|
|
160 |
|
|
|
(290 |
) |
|
|
215 |
|
Income
taxes
|
|
|
– |
|
|
|
– |
|
|
|
(189 |
) |
|
|
– |
|
Net
change in non-cash operating working capital items (Note
12)
|
|
|
(3,009 |
) |
|
|
3,468 |
|
|
|
(477 |
) |
|
|
(779 |
) |
Net
cash (used in) provided by operating activities
|
|
|
(2,738 |
) |
|
|
4,162 |
|
|
|
(1,182 |
) |
|
|
5,582 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment expenditures
|
|
|
(18,589 |
) |
|
|
(2,388 |
) |
|
|
(40,455 |
) |
|
|
(3,644 |
) |
Restricted
certificate of deposit and other assets
|
|
|
(9,144 |
) |
|
|
(2,183 |
) |
|
|
(4,064 |
) |
|
|
(2,759 |
) |
Net
cash used in investing activities
|
|
|
(27,733 |
) |
|
|
(4,571 |
) |
|
|
(44,519 |
) |
|
|
(6,403 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of warrants
|
|
|
352 |
|
|
|
– |
|
|
|
851 |
|
|
|
1,404 |
|
Proceeds
from debt
|
|
|
28,500 |
|
|
|
955 |
|
|
|
66,534 |
|
|
|
955 |
|
Payments
of debt
|
|
|
(1,834 |
) |
|
|
(2,782 |
) |
|
|
(23,038 |
) |
|
|
(5,744 |
) |
Net
cash provided by (used in) financing activities
|
|
|
27,018 |
|
|
|
(1,827 |
) |
|
|
44,347 |
|
|
|
(3,385 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
95 |
|
|
|
(30 |
) |
|
|
91 |
|
|
|
(44 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
decrease in cash and cash equivalents
|
|
|
(3,358 |
) |
|
|
(2,266 |
) |
|
|
(1,263 |
) |
|
|
(4,250 |
) |
Cash
and cash equivalents, beginning of period
|
|
|
5,192 |
|
|
|
2,868 |
|
|
|
3,097 |
|
|
|
4,852 |
|
Cash
and cash equivalents, end of period (Note 12)
|
|
$ |
1,834 |
|
|
$ |
602 |
|
|
$ |
1,834 |
|
|
$ |
602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
1,550 |
|
|
$ |
114 |
|
|
$ |
2,475 |
|
|
$ |
1,502 |
|
Income
taxes paid
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
25 |
|
|
$ |
– |
|
See Note
12 for additional supplemental cash flow information.
The accompanying notes are an
integral part of these interim condensed consolidated financial
statements.
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
These
condensed consolidated financial statements are prepared on the basis of a going
concern which assumes that Apollo Gold Corporation (“Apollo” or the “Company”)
will realize its assets and discharge its liabilities in the normal course of
business for the foreseeable future. To date the Company has funded
its operations through issuance of debt and equity securities and cash generated
by the Montana Tunnels joint venture (Note 4). The Company’s ability
to continue as a going concern is dependent on its ability to continue to issue
debt and/or equity securities, and/or generate cash flow from the Black Fox
mine. Currently, the Company is in discussions with the Banks under
the Project Facility (See Note 8(a)) regarding the possibility of rescheduling
the quarterly repayment installments, which are scheduled to commence September
30, 2009, to better reflect the expected cash flows from production at Black Fox
for the next twelve months.
As of June 30, 2009, the Company has a
working capital deficiency of $26.6 million and an accumulated deficit of $164.6
million. In addition, as at June 30, 2009, the Company held cash and
cash equivalents of $1.8 million and had current debt obligations of $26.9
million consisting of (1) the current portion of the project financing facility
of $19.8 million due in quarterly installments beginning on September 30, 2009
(Note 8(a)), (2) the current portion of the outstanding principal of the Series
2007-A convertible debentures of $4.1 million due in February 2010 (Note 9), and
(3) $3.0 million for other current debt. Additionally, as of June 30,
2009, the Company has committed to make capital expenditures of approximately $4
million for the development of Black Fox (Note 14(a)). Based on the
current cash balance, the successful rescheduling of the quarterly installment
payments of the Project Facility, and the projected cash flows from Black Fox
and the Cdn$13.0 million equity financing completed on July 16, 2009 (See Note
19), the Company expects to have sufficient funds to (1) repay the $26.9 million
current debt obligations listed above, (2) fund the capital commitments for the
development of Black Fox, and (3) fund corporate expenditures.
If the
Company is unable to generate sufficient cash flow from Black Fox or unable to
reschedule the quarterly installment payments under the Project Facility, it may
be unable to continue as a going concern and material adjustments would be
required to the carrying value of assets and liabilities and balance sheet
classifications used.
Apollo is
engaged in gold mining including extraction, processing, refining and the
production of other co-product metals, as well as related activities including
the exploration and development of potential mining properties and acquisition
of mining claims. Apollo owns Black Fox, an open pit mine and mill
located near Matheson in the Province of Ontario, Canada (“Black
Fox”). Mining of ores at the Black Fox Project began in March 2009,
milling operations commenced in April 2009, and commercial production commenced
in late May 2009.
The
Company is the operator of the Montana Tunnels mine, which is a 50% joint
venture with Elkhorn Tunnels, LLC (“Elkhorn”). The Montana Tunnels
mine is an open pit mine and mill located in the State of Montana that produced
gold dore and lead-gold and zinc-gold concentrates. As of April 30,
2009, the Montana Tunnels mine and mill were placed under care and
maintenance. The Company also owns the Diamond Hill mine, which is
also located in the State of Montana and is currently under care and
maintenance.
Apollo
also owns Mexican subsidiaries which own concessions at the Huizopa exploration
project (the “Huizopa Project”), located in the Sierra Madres in Chihuahua,
Mexico. The Huizopa Project is subject to an 80% Apollo/20% Mineras
Coronado joint venture agreement.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
3.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
These
unaudited consolidated interim financial statements have been prepared in
accordance with Canadian generally accepted accounting principles (“Canadian
GAAP”) and except as described in Note 18, conform in all material respects with
accounting principles generally accepted in the United States (“U.S.
GAAP”). The accounting policies followed in preparing these financial
statements are those used by the Company as set out in the audited financial
statements for the year ended December 31, 2008, except as disclosed in
(b)
below. Certain information and note disclosures normally included in
consolidated financial statements prepared in accordance with Canadian GAAP have
been omitted. These interim financial statements should be read
together with the Company’s audited financial statements for the year ended
December 31, 2008.
In the
opinion of management, all adjustments considered necessary for fair
presentation have been included in these financial
statements. Interim results are not necessarily indicative of the
results expected for the fiscal year. Certain prior period figures
have been reclassified to conform to the current period
presentation. In particular, for the three and six months ended June
30, 2008, $1.4 million and $2.0 million, respectively, that were as recorded as
cash inflows from investing activities have been reclassified to operating
activities in connection with proceeds from the sale of derivative
contracts.
(a)
|
Changes
in accounting policies
|
Effective
January 1, 2009, the Company adopted Handbook Section 3064, Goodwill and Intangible
Assets, which replaces Section 3062, and establishes revised standards
for recognition, measurement, presentation and disclosure of goodwill and
intangible assets. Concurrent with the introduction of this standard,
the CICA restricted the application of EIC 27, Revenues and Expenditures in the
Pre-operating Period (“EIC 27”). The adoption of Section 3064
on January 1, 2009, did not have a material impact on the Company’s financial
condition or operating results.
In
January 2009, the CICA issued EIC-173, Credit Risk and the Fair Value of
Financial Assets and Financial Liabilities, which requires the Company
to consider its own credit risk as well as the credit risk of its counterparty
when determining the fair value of financial assets and liabilities, including
derivative instruments. The accounting treatments provided in EIC-173 have
been applied in the preparation of these financial statements and as
required have been applied retrospectively without restatement of prior periods.
The adoption of this standard did not have a material impact on the
valuation of financial assets or liabilities.
4.
|
MONTANA
TUNNELS JOINT VENTURE
|
On July
28, 2006, Apollo entered into a JV Agreement with Elkhorn in respect of the
Montana Tunnels mine (the “Mine”). Elkhorn contributed $13 million in
return for a 50% interest in the Mine and Montana Tunnels Mining, Inc. (“MTMI”)
contributed all of its assets and liabilities related to the Mine into the joint
venture for a 50% interest in the Mine.
Elkhorn
received 55% and Apollo received 45% of the positive free cash flow, as defined
in the JV agreement, from the Mine until July 8, 2008 when Elkhorn had received
cash flow of $13 million (at which time Apollo had received $10.6
million). Since July 8, 2008, Apollo receives 60% and Elkhorn 40% of
the positive free cash flow from the Mine, until both parties have received an
equal amount (at which time Apollo and Elkhorn will have each received $17.7
million). Thereafter, the sharing will be 50/50.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
4.
|
MONTANA
TUNNELS JOINT VENTURE (continued)
|
Apollo
accounts for its 50% interest in the Montana Tunnels joint venture using the
proportionate consolidation method. As of December 31, 2006, the
Company recorded a deferred gain on the transfer of assets and liabilities to
the joint venture of $3.8 million. The deferred gain was amortized
using the units-of-production method over the expected life of the operation
based on the estimated recoverable gold equivalent
ounces. Amortization of the deferred gain was $0.1 million and $0.6
million for the three and six months ended June 30, 2009 and $0.4 million and
$0.9 million for the three and six months ended June 30, 2008,
respectively.
As of
April 30, 2009, Montana Tunnels was placed under care and
maintenance. Associated property, plant and equipment depreciable on
a straight-line basis continue to be depreciated, while property, plant and
equipment depreciable on a units-of-production basis have ceased being
depreciated in conjunction with the cessation of production.
Apollo’s
50% share of the assets and liabilities of the Montana Tunnels joint venture is
as follows:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
898 |
|
|
$ |
12 |
|
Other
non-cash current assets
|
|
|
1,422 |
|
|
|
5,323 |
|
|
|
|
2,320 |
|
|
|
5,335 |
|
Property,
plant and equipment
|
|
|
7,164 |
|
|
|
7,647 |
|
Deferred
stripping costs
|
|
|
– |
|
|
|
1,052 |
|
Restricted
certificates of deposit
|
|
|
7,587 |
|
|
|
7,587 |
|
Total
assets
|
|
$ |
17,071 |
|
|
$ |
21,621 |
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$ |
1,642 |
|
|
$ |
4,361 |
|
Accrued
site closure costs
|
|
|
8,842 |
|
|
|
8,503 |
|
Total
liabilities
|
|
$ |
10,484 |
|
|
$ |
12,864 |
|
Apollo’s
50% share of the results of operations and cash flows of the Montana Tunnels
joint venture is as follows:
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from sale of minerals
|
|
$ |
2,849 |
|
|
$ |
10,019 |
|
|
$ |
10,219 |
|
|
$ |
25,921 |
|
Direct
operating costs
|
|
|
3,007 |
|
|
|
9,467 |
|
|
|
11,409 |
|
|
|
18,526 |
|
Depreciation
and amortization
|
|
|
169 |
|
|
|
326 |
|
|
|
469 |
|
|
|
705 |
|
Accretion
expense – accrued site closure costs
|
|
|
169 |
|
|
|
164 |
|
|
|
339 |
|
|
|
329 |
|
|
|
|
3,345 |
|
|
|
9,957 |
|
|
|
12,217 |
|
|
|
19,560 |
|
Operating
(loss) income
|
|
|
(496 |
) |
|
|
62 |
|
|
|
(1,998 |
) |
|
|
6,361 |
|
Interest
income
|
|
|
– |
|
|
|
38 |
|
|
|
7 |
|
|
|
90 |
|
Interest
expense
|
|
|
(21 |
) |
|
|
(102 |
) |
|
|
(50 |
) |
|
|
(214 |
) |
(Loss)
income before income taxes
|
|
$ |
(517 |
) |
|
$ |
(2 |
) |
|
$ |
(2,041 |
) |
|
$ |
6,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
$ |
628 |
|
|
$ |
3,987 |
|
|
$ |
1,835 |
|
|
$ |
8,811 |
|
Net
cash used in investing activities
|
|
$ |
(2 |
) |
|
$ |
(684 |
) |
|
$ |
(9 |
) |
|
$ |
(1,361 |
) |
Net
cash used in by financing activities
|
|
$ |
(273 |
) |
|
$ |
(3,164 |
) |
|
$ |
(940 |
) |
|
$ |
(7,303 |
) |
Cash used
in financing activities includes cash distributed to the joint venture partners,
Apollo and Elkhorn. These cash flows eliminate upon
consolidation.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
5.
|
DERIVATIVE
INSTRUMENTS
|
Fair
value of derivative instruments consists of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian
dollar purchase contracts (Note 8(b))
|
|
$ |
– |
|
|
$ |
2,242 |
|
|
$ |
2,242 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
Gold,
silver and lead contracts
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
552 |
|
|
|
552 |
|
Less: Current
portion
|
|
|
– |
|
|
|
(469 |
) |
|
|
(469 |
) |
|
|
– |
|
|
|
(552 |
) |
|
|
(552 |
) |
Long-term
portion
|
|
$ |
– |
|
|
$ |
1,773 |
|
|
$ |
1,773 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold
forward sales contracts (Note 8(b))
|
|
$ |
– |
|
|
$ |
(16,732 |
) |
|
$ |
(16,732 |
) |
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
Less: Current
portion
|
|
|
– |
|
|
|
3,708 |
|
|
|
3,708 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Long-term
portion
|
|
$ |
– |
|
|
$ |
(13,024 |
) |
|
$ |
(13,024 |
) |
|
$ |
– |
|
|
$ |
– |
|
|
$ |
– |
|
Inventories
consist of:
|
|
|
|
|
|
|
Concentrate
inventory
|
|
$ |
– |
|
|
$ |
373 |
|
Doré
inventory
|
|
|
2,137 |
|
|
|
21 |
|
In-circuit
gold inventory
|
|
|
1,260 |
|
|
|
– |
|
Stockpiled
ore inventory
|
|
|
3,619 |
|
|
|
2,983 |
|
Materials
and supplies
|
|
|
717 |
|
|
|
777 |
|
|
|
$ |
7,733 |
|
|
$ |
4,154 |
|
Other
information related to inventories is:
|
|
Three
months ended
June
30,
|
|
|
Six
months ended
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
recognized as an expense in direct operating costs
|
|
$ |
4,371 |
|
|
$ |
6,973 |
|
|
$ |
10,915 |
|
|
$ |
13,339 |
|
Expenses
related to the write down of the carrying value of inventories to net
realizable value
|
|
|
- |
|
|
|
15 |
|
|
|
1,029 |
|
|
|
15 |
|
The
Company acquired auction rate securities (“ARS”) in 2007, which are recorded in
long-term investments, with a face value of $1.5 million. The Company
has recorded an other than temporary impairment on its ARS, within foreign
exchange gain and other in the consolidated statement of operations,
representing a loss of $0.01 million for the six months ended June 30, 2009, and
losses of $0.1 million and $0.2 million for the three and six months ended June
30, 2008, respectively. As such, no amounts have been recorded in
other comprehensive income. The adjusted cost basis and fair value of
ARS at June 30, 2009 and December 31, 2008 are $1.1 million and $1.1 million,
respectively. See Note 16(g). The ARS are pledged as collateral
for a $0.9 million margin loan.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
8.
|
BLACK
FOX PROJECT FINANCING FACILITY
|
On
February 20, 2009, the Company entered into a $70.0 million project financing
agreement (the “Project Facility”) with two banks (the “Banks”) relating to
Black Fox. As of June 30, 2009, the Company had borrowed the total
amount of the $70 million available under the Project Facility. On
February 23, 2009, the Company used $15.0 million of the proceeds from the
Project Facility to repay the $15.0 million bridge facility entered into on
December 10, 2008 (the “Bridge Facility”) and has utilized the remaining $55.0
million to complete the development of Black Fox and to provide for certain
agreed corporate expenditures.
The terms
of the Project Facility include: (i) a commitment by the Banks to
lend to the Company up to $70.0 million available for drawdown between February
20, 2009 and June 30, 2009; (ii) interest on the outstanding principal amount
accruing at a rate equal to the London interbank offered rate (“LIBOR”) plus 7%
per annum and payable in monthly installments commencing March 31, 2009
(interest is currently payable monthly but may be monthly, quarterly or such
other period as may be agreed to by the Banks and the Company); (iii) scheduled
repayment of the principal amount in unequal quarterly amounts commencing
September 30, 2009 with the final repayment no later than March 31, 2013; and
(iv) an arrangement fee of $3.5 million, which was paid by the Company to the
Banks in cash on February 23, 2009. The average monthly LIBOR rate
charged to the Company during the three and six months ended June 30, 2009 was
0.4% and 0.4%, respectively.
Borrowings under the Project Facility
are secured by substantially all of the Company’s assets, including the Black
Fox Project, and the stock of its subsidiaries. The Project Facility
contains various financial and operational covenants that impose limitations on
the Company which include, among other requirements, the
following: maintenance of certain financial coverage ratios and
minimum project reserves, satisfaction of a minimum tangible net worth test, and
the operation of Black Fox in compliance with an agreed cash flow budgeting and
operational model. In addition, the Black Fox Project is subject to a
completion test that must be satisfied by October 31, 2009. As at
June 30, 2009, the Company was in compliance with the various financial
covenants of the Project Facility. For the three-month
period ended July 31, 2009, gold production was less than 80% of the agreed
amount with the banks involved with the Project Facility which triggered a
“review event” as defined in the Project Facility agreement. The
occurrence of a review event triggers the ability of the banks to review the
Project Facility and determine if they wish to continue with the Project
Facility. Although the occurrence of the “review event” triggers the
foregoing rights of the Banks under the Project Facility, the Banks have
informed the Company that they continue to support Black Fox and management of
the Company is confident that the Banks will not seek a termination of the
Project Facility as a result of the occurrence of the review
event. The Company is taking appropriate steps to improve grade
control and is engaged in constructive discussions with the Banks regarding
resolving any issues related to the review event including rescheduling of the
quarterly debt repayment installments, beginning September 30, 2009, to better
reflect the expected cash flows from production at Black Fox for the next twelve
months.
In
consideration for providing the financing, the Banks were issued an aggregate of
34,836,111 warrants (“Banks’ Compensation Warrants”) at an exercise price of
$0.201 (Cdn$0.252) per share (subject to anti-dilution adjustments) that expire
on February 20, 2013. The Banks’ Compensation Warrants are in
addition to the 42,614,254 common share purchase warrants issued to the Banks in
connection with the Bridge Facility. The Banks’ Compensation Warrants
were assigned a fair value of $7.4 million, using an option pricing model with
the following assumptions: no dividends are paid, a volatility of the
Company’s share price of 81%, an expected life of the warrants of four years,
and an annual risk-free rate of 1.9%.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
8.
|
BLACK
FOX PROJECT FACILITY (continued)
|
The
Company recorded a $10.9 million discount on the Project Facility, comprised of
the $3.5 million arrangement fee and the $7.4 million fair value of the Banks’
Compensation Warrants, which discount will be accreted over the life of the loan
using the effective interest method and charged to interest
expense. The accreted interest from the date of loan origination
through May 24, 2009 (the date on which Black Fox entered commercial production)
was capitalized to Black Fox. Additionally, the Company recorded $0.6
million of debt transactions costs that were expensed immediately.
The drawn
amounts on the Project Facility as of June 30, 2009 are repayable by the Company
as shown in the table below. Amounts due on the Project Facility are
included within current and long-term portion of debt, which balance includes
notes payable, leases payable and other debt, as follows:
2009
|
|
$ |
15,300 |
|
2010
|
|
|
13,800 |
|
2011
|
|
|
10,200 |
|
2012
|
|
|
24,500 |
|
2013
|
|
|
6,200 |
|
Principle
balance of Project Facility
|
|
|
70,000 |
|
Less
unamortized debt discount
|
|
|
(9,736 |
) |
Total
of project facility included within debt on the balance
sheet
|
|
|
60,264 |
|
Less
current portion
|
|
|
(19,794 |
) |
Long-term
portion
|
|
$ |
40,470 |
|
(b)
|
Derivative
Program in Connection with the Project
Facility
|
As a part
of the Project Facility, the Company and the Banks have entered into a
derivative program covering a portion of both the Company’s gold sales and its
Canadian dollar operating costs (Note 5). The Company entered into a
250,430 ounce gold forward sales program which is allocated across the four year
term of the Project Facility which began May 2009. The weighted
average price of the sales program is $876 per ounce of gold. The
foreign exchange derivative program is for the Canadian dollar equivalent of $58
million over a period covering the four year term of the Project Facility which
began April 2009. Settlements of the remaining gold forward sales
contracts and Canadian dollar foreign exchange contracts as of June 30, 2009 are
as follows (table not in thousands):
|
|
Gold Forward Sales Contracts
|
|
|
Canadian Dollar Foreign Exchange Contracts
|
|
|
|
|
|
|
Average Contract
Price Per Ounce
|
|
|
Pay US Dollars
(Millions)
|
|
|
|
|
|
Purchase
Canadian Dollars
(Millions)
|
|
2009
|
|
|
44,357 |
|
|
$ |
876 |
|
|
$ |
5.6 |
|
|
$ |
1.21 |
|
|
$ |
6.8 |
|
2010
|
|
|
54,261 |
|
|
$ |
876 |
|
|
$ |
13.4 |
|
|
$ |
1.21 |
|
|
$ |
16.3 |
|
2011
|
|
|
54,704 |
|
|
$ |
876 |
|
|
$ |
16.1 |
|
|
$ |
1.21 |
|
|
$ |
19.5 |
|
2012
|
|
|
73,458 |
|
|
$ |
876 |
|
|
$ |
16.3 |
|
|
$ |
1.21 |
|
|
$ |
19.7 |
|
2013
|
|
|
14,523 |
|
|
$ |
876 |
|
|
$ |
4.1 |
|
|
$ |
1.21 |
|
|
$ |
4.9 |
|
|
|
|
241,303 |
|
|
|
|
|
|
$ |
55.5 |
|
|
|
|
|
|
$ |
67.2 |
|
The
Company did not apply hedge accounting to these transactions. As a
result, the Company accounts for these derivative instruments as investments and
records the changes in unrealized gains and losses in the consolidated statement
of operations each period. The fair value of these derivatives is
recorded as an asset or liability at each balance sheet date (see Note
5).
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
8.
|
BLACK
FOX PROJECT FACILITY (continued)
|
(c)
|
Additional
Debt Transaction Costs Resulting from the Project
Facility
|
Under the
terms of a previously existing engagement letter between the Company and a
certain financial advisory services firm (the “Firm”) pursuant to which the Firm
agreed to provide financial advisory services to the Company, the Project
Facility constituted an “alternative transaction” that required the Company to
compensate the Firm by issuing to it 2,172,840 common shares and 2,567,901
common share purchase warrants exercisable for a two year period at an exercise
price of $0.205 (Cdn$0.256). In addition, the Company was required to
compensate the Firm for related financial advisory services by issuing to it
1,000,000 common shares of the Company. The Company recorded debt
transaction costs of $1.2 million comprised of $0.8 million for the common
shares issued to the Firm and $0.4 million for the warrants issued to the
Firm. The warrants were assigned a fair value of $0.4 million, using
an option pricing model with the following assumptions: no dividends
are paid, a volatility of the Company’s share price of 80%, an expected life of
the warrants of two years, and an annual risk-free rate of 1.2%.
9.
|
CONVERTIBLE
DEBENTURES
|
On
February 19, 2009, the Company reached an agreement with the largest holder (the
“Large Holder”) of its Series 2007-A convertible debentures (the “2007
Debentures”) to extend the maturity date of the $4.3 million principal amount of
the 2007 Debentures held by the Large Holder from February 23, 2009 to February
23, 2010 (the “Extended Debentures”).
The Large Holder owned $4.3 million
principal amount of the 2007 Debentures as of December 31, 2008 and February 23,
2009 (on which $0.8 million of interest was accrued as of February 23, 2009) and
8,580,000 of warrants issued in connection with the 2007 Debentures (the “2007
Debenture Warrants). The Company and the Large Holder also agreed
that the Company shall have the option to repay on February 23, 2009 the $0.8
million of accrued interest on the Large Holder’s 2007 Debentures in either
common shares of the Company or cash. On February 23, 2009, the
Company repaid the $0.8 million of accrued interest on the large Holder’s 2007
Debentures by issuing 2,444,765 common shares of the Company. In
consideration for the foregoing, the Company agreed to (i) issue 2,000,000
common shares of the Company to the Large Holder on February 23, 2009 (the
“Large Holder Shares”), (ii) extend the expiration date of the 8,580,000 2007
Debenture Warrants issued to the Large Holder to March 4, 2010 (the “Large
Holder Warrants”) and (iii) reduce the exercise price of the Large Holder
Warrants from $0.50 to $0.25.
The terms
and conditions of the $3.1 million aggregate principal amount of 2007 Debentures
and 2007 Debenture Warrants not owned by the Large Holder were not amended and
remained unchanged and principal and $0.6 million interest were repaid in cash
on February 23, 2009.
The
Company recorded a loss on modification of convertible debentures of $2.0
million comprised of $0.6 million for the Large Holder Shares, $1.3 million for
the Large Holder Warrants and $0.1 million for administrative
costs. The Large Holder Warrants were assigned a fair value of $1.3
million, using an option pricing model with the following
assumptions: no dividends are paid, a volatility of the Company’s
share price of 97%, an expected life of the warrants of one year, and an annual
risk-free rate of 1.2%.
The
Extended Debentures bear interest at a rate of 18% per annum and are convertible
into common shares of the Company at $0.50 per common share. The 2007
Debentures are convertible, at the option of the holder, at any time prior to
maturity into common shares of the Company at a price of $0.50 per common
share.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
9.
|
CONVERTIBLE
DEBENTURES (continued)
|
The
Company has the option to force conversion of the 2007 Debentures under certain
circumstances. The Extended Debentures are classified as a compound
financial instrument for accounting purposes.
On the
date of extension of the Extended Debentures, the $4.3 million principal was
allocated to the relative fair values of the Debentures ($3.7 million) and the
holder’s option to convert the principal balance into common shares ($0.6
million) (the “Conversion Option”). The $3.7 million fair value of
the Extended Debentures is classified as a liability, while the $0.6 million
allocated to the Conversion Option is classified as a separate component within
shareholders’ equity.
Over
their one-year term, the Extended Debentures are accreted to their face value
through a periodic charge to accretion expense with a corresponding credit to
the liability component. The accretion expense is based on the
effective interest method. For the three and six months ended June
30, 2009, the Company recorded accretion expense of $0.3 million and $0.4
million, respectively, related to the Extended Debentures, which is included in
interest expense.
(a)
|
Shares
issued in 2009
|
(i) For
the six months ended June 30, 2009, there were 4,833,332 shares issued upon
exercise of warrants for proceeds of $0.9 million. Each warrant
exercised had an exercise price of $0.176.
(ii) On
February 20, 2009, the Company issued to a Firm (see Note 8(c)) 3,172,840 common
shares of the Company and 2,567,901 common share purchase warrants exercisable
for a two year period at an exercise price of $0.204 (Cdn$0.256) for services
rendered.
(iii) On
February 23, 2009, the Company issued 2,444,765 common shares of the Company for
payment of the $0.8 million of accrued interest on the Large Holder’s 2007
Debentures (see Note 9). In addition, the Company issued 2,000,000
common shares of the Company in consideration for extending the 2007 Debentures
and extended the expiration date of 8,580,000 warrants from February 23, 2009 to
March 4, 2010 and reduced the exercise price of these warrants from $0.50 to
$0.25.
A summary
of information concerning outstanding warrants at June 30, 2009 is as
follows:
|
|
Number of Warrants
and Shares Issuable
upon Exercise
|
|
Balance,
December 31, 2008
|
|
|
91,277,374 |
|
Warrants
issued
|
|
|
37,404,012 |
|
Warrants
exercised
|
|
|
(4,833,333 |
) |
Warrants
expired
|
|
|
(9,725,927 |
) |
Balance,
June 30, 2009
|
|
|
114,122,126 |
|
The
following table summarizes outstanding warrants as at June 30,
2009:
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
10.
|
SHARE
CAPITAL (continued)
|
|
|
Number of Warrants
and Shares Issuable
upon Exercise
|
|
|
|
|
|
|
|
|
|
|
Exercisable
in US$
|
|
|
November
8, 2006
|
|
|
2,666,666 |
|
|
|
0.176 |
|
November
8, 2009
|
November
8, 2006
|
|
|
1,178,944 |
|
|
|
0.50 |
|
November
8, 2009
|
February
23, 2007
|
|
|
8,580,000 |
|
|
|
0.25 |
|
March
4, 2010
|
|
|
|
12,425,610 |
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
in Cdn$
|
|
|
August
21, 2008
|
|
|
1,020,000 |
|
|
|
0.50 |
|
February
21, 2010
|
December
31, 2008
|
|
|
255,000 |
|
|
|
0.30 |
|
December
31, 2010
|
February
20, 2009
|
|
|
2,567,901 |
|
|
|
0.256 |
|
February
20, 2011
|
July
24, 2008
|
|
|
20,403,250 |
|
|
|
0.65 |
|
July
24, 2011
|
December
10, 2008
|
|
|
42,614,254 |
|
|
|
0.221 |
|
December
10, 2012
|
February
20, 2009
|
|
|
34,836,111 |
|
|
|
0.252 |
|
February
20, 2013
|
|
|
|
101,696,516 |
|
|
|
|
|
|
|
|
|
114,122,126 |
|
|
|
|
|
|
|
In
addition, 2,448,390 units issued to placement agents on July 24, 2008 (the
Agents’ Units) are outstanding. Each Agents’ Unit is exercisable at
Cdn$0.60 for four years into one common share of the Company and one- half of
one warrant (the Agents’ Warrant), with each whole Agents’ Warrant exercisable
into one common share of the Company at Cdn$0.78. The Agent’s Units
and Agents’ Warrants expire on July 24, 2012.
A summary of information concerning
outstanding fixed stock options at June 30, 2009 is as follows:
|
|
|
|
|
Weighted
Average
Exercise
Price Per
Share
|
|
Balance,
December 31, 2008
|
|
|
8,281,309 |
|
|
$ |
0.77 |
|
Options
granted
|
|
|
3,566,307 |
|
|
|
0.33 |
|
Options
forfeited
|
|
|
(78,600 |
) |
|
|
0.49 |
|
Balance,
June 30, 2009
|
|
|
11,769,016 |
|
|
$ |
0.64 |
|
The
following table summarizes information concerning outstanding and exercisable
stock options at June 30, 2009:
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
10.
|
SHARE
CAPITAL (continued)
|
|
|
|
|
|
|
|
|
|
Weighted
Average
Exercise
Price Per
Share
|
|
|
Weighted
Average
Remaining
Contractual Life
(in years)
|
|
|
|
|
|
Weighted
Average
Exercise
Price Per
Share
|
|
100,000
|
|
September
1, 2011
|
|
$ |
0.46 |
|
|
|
2.2 |
|
|
|
100,000 |
|
|
$ |
0.46 |
|
676,700
|
|
February
18, 2013
|
|
|
2.24 |
|
|
|
3.7 |
|
|
|
676,700 |
|
|
|
2.24 |
|
260,000
|
|
March
10, 2014
|
|
|
2.05 |
|
|
|
4.7 |
|
|
|
260,000 |
|
|
|
2.05 |
|
25,000
|
|
May
19, 2014
|
|
|
1.44 |
|
|
|
4.9 |
|
|
|
25,000 |
|
|
|
1.44 |
|
20,200
|
|
August
10, 2014
|
|
|
0.95 |
|
|
|
5.1 |
|
|
|
20,200 |
|
|
|
0.95 |
|
1,159,750
|
|
March
10, 2015
|
|
|
0.65 |
|
|
|
5.7 |
|
|
|
1,159,750 |
|
|
|
0.65 |
|
100,000
|
|
August
4, 2015
|
|
|
0.27 |
|
|
|
6.1 |
|
|
|
100,000 |
|
|
|
0.27 |
|
300,000
|
|
December
12, 2015
|
|
|
0.20 |
|
|
|
6.5 |
|
|
|
300,000 |
|
|
|
0.20 |
|
125,000
|
|
March
28, 2016
|
|
|
0.65 |
|
|
|
6.7 |
|
|
|
125,000 |
|
|
|
0.65 |
|
200,000
|
|
May
24, 2016
|
|
|
0.53 |
|
|
|
6.9 |
|
|
|
200,000 |
|
|
|
0.53 |
|
108,000
|
|
August
10, 2016
|
|
|
0.48 |
|
|
|
7.1 |
|
|
|
108,000 |
|
|
|
0.48 |
|
20,000
|
|
November
9, 2016
|
|
|
0.32 |
|
|
|
7.4 |
|
|
|
20,000 |
|
|
|
0.32 |
|
2,922,746
|
|
February
6, 2017
|
|
|
0.57 |
|
|
|
7.6 |
|
|
|
2,922,746 |
|
|
|
0.57 |
|
49,825
|
|
August
13, 2017
|
|
|
0.46 |
|
|
|
8.1 |
|
|
|
24,913 |
|
|
|
0.46 |
|
2,077,738
|
|
March
27, 2018
|
|
|
0.66 |
|
|
|
8.7 |
|
|
|
1,038,869 |
|
|
|
0.66 |
|
21,250
|
|
August
12, 2018
|
|
|
0.37 |
|
|
|
9.1 |
|
|
|
– |
|
|
|
– |
|
55,000
|
|
November
11, 2018
|
|
|
0.15 |
|
|
|
9.4 |
|
|
|
– |
|
|
|
– |
|
3,220,067
|
|
March
31, 2019
|
|
|
0.32 |
|
|
|
9.8 |
|
|
|
– |
|
|
|
– |
|
|
|
May
6, 2019
|
|
|
0.45 |
|
|
|
9.9 |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
$ |
0.64 |
|
|
|
7.9 |
|
|
|
7,081,178 |
|
|
$ |
0.79 |
|
(d)
|
Stock-based
compensation
|
The fair
value of each option granted is estimated at the time of grant using the
Black-Scholes option pricing model with weighted average assumptions for grants
as follows:
|
|
Six months ended June
30,
|
|
|
|
|
|
|
|
|
Risk
free interest rate
|
|
|
1.9 |
% |
|
|
2.9 |
% |
Dividend
yield
|
|
|
0 |
% |
|
|
0 |
% |
Volatility
|
|
|
78 |
% |
|
|
73 |
% |
Expected
life in years
|
|
|
6 |
|
|
|
6 |
|
Weighted
average grant-date fair value of stock options
|
|
$ |
0.22 |
|
|
$ |
0.44 |
|
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
Interest
expense consists of:
|
|
Three months ended
June 30,
|
|
|
Six months ended
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretion
on convertible debentures
|
|
$ |
312 |
|
|
$ |
877 |
|
|
$ |
1,282 |
|
|
$ |
1,770 |
|
Amortization
of debt discount – Project Facility
|
|
|
469 |
|
|
|
– |
|
|
|
469 |
|
|
|
– |
|
Capital
leases, Project Facility and other
|
|
|
653 |
|
|
|
144 |
|
|
|
710 |
|
|
|
399 |
|
|
|
$ |
1,434 |
|
|
$ |
1,021 |
|
|
$ |
2,461 |
|
|
$ |
2,169 |
|
For the
three and six months ended June 30, 2009, the Company recorded capitalized
interest of $1.0 million and $1.8 million, respectively.
The
Company recorded a tax benefit of $0.2 million for the six month period ended
June 30, 2009 due to the issuance of flow-through shares but recorded no other
recovery for income taxes as the net loss carry forwards are fully offset by a
valuation allowance.
The
Company recorded income tax expense of $0.1 million for the three and six month
period ended June 30, 2008 for alternative minimum taxes resulting on its income
from U.S. operations. There was no other income tax expense recorded
during the six month period ended June 30, 2008, as additional taxable income
was offset by recoveries of prior tax losses.
13.
|
EARNINGS
(LOSS) PER SHARE
|
Basic
earnings per share (“EPS”) is calculated by dividing net income available to
common shareholders by the weighted average number of common shares outstanding
during the period. Diluted EPS is calculated to reflect the dilutive
effect of exercising outstanding warrants and stock options by applying the
treasury stock method.
Earnings
used in determining earnings per share are presented below.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
13. EARNINGS
(LOSS) PER SHARE (continued)
|
|
Three
months ended
June
30,
|
|
|
Six
months ended
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
1,266 |
|
|
$ |
(1,329 |
) |
|
$ |
(23,487 |
) |
|
$ |
2,325 |
|
Weighted
average number of shares, basic
|
|
|
234,161,561 |
|
|
|
161,168,592 |
|
|
|
230,452,859 |
|
|
|
160,252,248 |
|
Dilutive
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
|
947,780 |
|
|
|
– |
|
|
|
– |
|
|
|
549,662 |
|
Warrants
|
|
|
45,764,734 |
|
|
|
– |
|
|
|
– |
|
|
|
5,083,533 |
|
Convertible
debentures
|
|
|
8,580,000 |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
Weighted
average number of shares, diluted
|
|
|
289,454,075 |
|
|
|
161,168,592 |
|
|
|
230,452,859 |
|
|
|
165,885,443 |
|
Basic
net income (loss) per share
|
|
$ |
0.01 |
|
|
$ |
(0.01 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.01 |
|
Diluted
net income (loss) per share
|
|
$ |
0.00 |
|
|
$ |
(0.01 |
) |
|
$ |
(0.10 |
) |
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
and warrants outstanding but not included in computation of diluted
weighted average number of shares (“OWNI”) because the strike prices
exceeded the average price of the common shares
|
|
|
33,103,283
|
|
|
|
5,540,249 |
|
|
|
33,124,533 |
|
|
|
5,513,999 |
|
Average
exercise price of OWNI
|
|
$ |
0.60 |
|
|
$ |
1.02 |
|
|
$ |
0.59 |
|
|
$ |
1.02 |
|
Shares
issuable for convertible debentures excluded from calculation of EPS
because their effect would have been anti-dilutive
|
|
|
– |
|
|
|
14,876,200 |
|
|
|
8,580,000 |
|
|
|
14,876,200 |
|
Average
conversion price of anti-dilutive convertible securities
|
|
|
n/a |
|
|
$ |
0.50 |
|
|
$ |
0.50 |
|
|
$ |
0.50 |
|
Due to a
net loss for the six month period ended June 30, 2009, an additional 95.2
million warrants and stock options were excluded from the EPS computation
because their effect would have been anti-dilutive. Also, due to a
net loss for the three month period ended June 30, 2008, an additional 31.1
million warrants and stock options were excluded from the EPS computation
because their effect would have been anti-dilutive.
14.
|
COMMITMENTS
AND CONTINGENCIES
|
The
Company had entered into a number of contractual commitments related to the
development of Black Fox. As of June 30, 2009, these commitments
totaled approximately $4 million and are expected to become due within the next
12 months.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
15.
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
(a)
|
Net
changes in non-cash operating working capital items
are:
|
|
|
Three
months ended
June
30,
|
|
|
Six
months ended
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Increase)
decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable and other
|
|
$ |
417 |
|
|
$ |
1,579 |
|
|
$ |
73 |
|
|
$ |
(439 |
) |
Prepaids
|
|
|
423 |
|
|
|
179 |
|
|
|
431 |
|
|
|
423 |
|
Inventories
|
|
|
(6,004 |
) |
|
|
282 |
|
|
|
(3,579 |
) |
|
|
(1,636 |
) |
Increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
|
2,208 |
|
|
|
2,416 |
|
|
|
2,434 |
|
|
|
1,724 |
|
Accrued
liabilities
|
|
|
152 |
|
|
|
(1,146 |
) |
|
|
427 |
|
|
|
(1,162 |
) |
Property
and mining taxes payable
|
|
|
(205 |
) |
|
|
158 |
|
|
|
(263 |
) |
|
|
311 |
|
|
|
$ |
(3,009 |
) |
|
$ |
3,468 |
|
|
$ |
(477 |
) |
|
$ |
(779 |
) |
(b)
|
Components
of cash and cash equivalents are:
|
|
|
|
|
|
|
|
Cash
|
|
$ |
1,834 |
|
|
$ |
174 |
|
Cash
equivalents
|
|
|
– |
|
|
|
428 |
|
Cash
and cash equivalents
|
|
$ |
1,834 |
|
|
$ |
602 |
|
(c)
|
Non-cash
transactions
|
|
|
Three
months ended
June
30,
|
|
|
Six
months ended
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in property, plant and equipment due to assets acquired via issuance of
notes payable
|
|
$ |
3,406 |
|
|
$ |
1,425 |
|
|
$ |
4,039 |
|
|
$ |
1,425 |
|
Increase
in prepaid assets due to financing a portion of the Company’s insurance
program via the issuance of notes payable
|
|
|
– |
|
|
|
– |
|
|
|
582 |
|
|
|
– |
|
Increase
in contributed surplus for the issuance of warrants to the Banks in
connection with the Project Facility (Note 8(a)) and a corresponding
decrease in debt for the debt discount
|
|
|
– |
|
|
|
– |
|
|
|
7,395 |
|
|
|
– |
|
Increase
in share capital and reduction in convertible debentures due to the
conversion of Series 2007-A convertible debentures into common shares of
the Company
|
|
|
– |
|
|
|
140 |
|
|
|
– |
|
|
|
621 |
|
Increase
in share capital and a decrease in future income tax assets
upon renouncement of expenditures in connection with a flow-through share
offering completed in October 2007
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
1,165 |
|
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
16.
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS
|
The Company examines the various
financial instrument risks to which it is exposed and assesses the impact and
likelihood of those risks. These risks may include credit risk, liquidity risk,
currency risk, interest rate risk and commodity risk. Where material,
these risks are reviewed and monitored by the Board of Directors.
(a)
|
Capital
Risk Management
|
The Company manages its capital to
ensure that it will be able to continue as a going concern while maximizing the
return to shareholders through the optimization of its debt and equity balance.
The Company’s overall strategy remains unchanged from 2008.
The capital structure of the Company
consists of cash and cash equivalents, notes payable and other current debt,
convertible debentures and equity attributable to common shareholders,
comprising issued share capital, equity component of convertible debentures,
note warrants, contributed surplus and deficit.
Credit risk on financial instruments
arises from the potential for counterparties to default on their obligations to
the Company. The Company’s credit risk is limited to cash and cash
equivalents, trade receivables, restricted cash, restricted certificates of
deposit, derivative instruments and auction rate securities in the ordinary
course of business. Cash and cash equivalents, restricted cash,
restricted certificates of deposit, derivative instruments and auction rate
securities are placed with high-credit quality financial
institutions. The Company sells its metal production exclusively to
large international organizations with strong credit ratings. The
balance of trade receivables owed to the Company in the ordinary course of
business is not significant. The carrying value of accounts
receivable approximates fair value due to the relatively short periods to
maturity on these instruments. Therefore, the Company is not exposed
to significant credit risk. Overall, the Company’s credit risk has
not changed significantly from 2008.
The Company assesses quarterly whether
there has been an impairment of the financial assets of the
Company. Other than disclosed in Note 7 related to ARS, the Company
has not recorded an impairment on any of the financial assets of the Company
during the six month period ended June 30, 2009. Apollo continues to
maintain a portion of its investments in ARS, which are floating rate securities
that are marketed by financial institutions with auction reset dates at 28 day
intervals to provide short-term liquidity. All ARS were rated AAA
when purchased, pursuant to Apollo’s investment policy at the
time. Auction rate securities are no longer permitted to be purchased
under the Company’s current investment policy. Beginning in August
2007, a number of auctions began to fail and the Company is currently holding
ARS with a par value of $1.5 million which currently lack
liquidity. All of Apollo’s ARS have continued to make regular
interest payments. The current rating by Standard and Poor on
Apollo’s ARS is A. If uncertainties in the credit and capital markets
persist or Apollo’s ARS experience further downgrades, the Company may incur
additional impairments, which may continue to be judged other than
temporary. Apollo believes that the current illiquidity of its ARS
will not have a material impact on Apollo’s financial
condition.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
16. FAIR
VALUE OF FINANCIAL INSTRUMENTS (continued)
The Company’s maximum exposure to
credit risk is represented by the carrying amount on the balance sheet of cash
and cash equivalents, trade receivables, restricted cash, restricted
certificates of deposit, derivative instruments and auction rate
securities. There are no material financial assets that the Company
considers to be past due.
Liquidity risk is the risk that the
Company will not meet its financial obligations as they become
due. The Company has a planning and budgeting process to monitor
operating cash requirements including amounts projected for the existing capital
expenditure program and plans for expansion, which are adjusted as input
variables change. These variables include, but are not limited to,
available bank lines, mineral production from existing operations, commodity
prices, taxes and the availability of capital markets. As these
variables change, liquidity risks may necessitate the need for the Company to
conduct equity issues or obtain project debt financing.
Trade payables and accrued liabilities
are paid in the normal course of business typically according to their
terms. The Company ensures that there are sufficient committed loan
facilities to meet its short-term business requirements, taking into account its
anticipated cash flows from operations and its holdings of cash and cash
equivalents. As of June 30, 2009, the Company has borrowed $70
million against a Project Facility (See Note 8(a)). At June 30, 2009, the
Company is in compliance with its debt covenants. See Note 8(a) for a
discussion of the occurrence of a “review event” and the possibility of
restructuring the installment payments associated with the Project
Facility.
Financial instruments that impact the
Company’s net income or other comprehensive income due to currency fluctuations
include: Canadian dollar denominated cash and cash equivalents,
restricted certificates of deposit and accounts payable. For the
three and six months ended June 30, 2009, the sensitivity of the Company’s net
income due to changes in the exchange rate between the Canadian dollar and the
United States dollar would have impacted net income by $0.1 million and $0.2
million, respectively, for a 10% increase or decrease in the Canadian
dollar.
On
February 20, 2009, in order to meet certain loan criteria of the Project
Facility (Note 8(a)), the Company entered into certain option
contracts. See Note 8(b) for details.
The Company is exposed to interest rate
risk on its outstanding borrowings and short-term investments. As of
June 30, 2009, the Company’s significant outstanding borrowings consist of $70.0
million of the Project Facility (Note 8(a)) and the Extended Debentures which
have an aggregate $4.3 million face value (Note 9). Amounts
outstanding under the Project Facility accrue interest at a floating rate based
on LIBOR plus 7.0% and the Extended Debentures have a stated rate of
18%. The average monthly LIBOR rates charged to the Company on the
Project Facility during the three and six month period ended June 30, 2009 were
0.4% and 0.4%, respectively. The Company monitors its exposure to
interest rates and has not entered into any derivative contracts to manage this
risk. The weighted average interest rates paid by the Company on its
outstanding borrowings during the three and six month period ended June 30, 2009
were 7.3% and 8.0%, respectively.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
16. FAIR
VALUE OF FINANCIAL INSTRUMENTS (continued)
For the three and six month period
ended June 30, 2009, a 100 basis point increase or decrease in interest rates
would not have had a significant impact on the amount of interest expense
recorded during those periods.
The Company’s principal businesses
include the sale of several commodities. Revenues, earnings and cash
flows from the sale of gold, lead, zinc and silver are sensitive to changes in
market prices, over which the Company has little or no control. The Company has
the ability to address its price-related exposures through the limited use of
options, future and forward contracts, but generally does not enter into such
arrangements.
On February 20, 2009, in order to meet
certain loan criteria of the Project Facility (Note 8(a)), the Company entered
into certain gold forward sales contracts. See Note 8(b) for
details.
(g)
|
Fair
Value Estimation
|
The fair value of financial instruments
that are not traded in an active market (such as derivative instruments) is
determined using a Black-Scholes model based on assumptions that are supported
by observable current market conditions, with the exception of auction rate
securities. The Company’s ARS investments (see Note 7) are valued
using a probability-weighted discounted cash flow valuation. The
Company’s valuation of the ARS investments considers possible cash flows and
probabilities forecasted under certain potential scenarios. Each scenario’s cash
flow is multiplied by the probability of that scenario occurring. The
major inputs included in the valuation are: (i) maximum contractual ARS interest
rate, (ii) probability of passing auction/early redemption at each auction,
(iii) probability of failing auction at each auction, (iv) probability of
default at each auction, (v) severity of default, and (vi) discount
rate. Changes in these assumptions to reasonably possible alternative
assumptions would not significantly affect the Company’s results.
The carrying value less impairment
provision, if necessary, of cash and cash equivalents, restricted certificates
of deposit, long-term investments, trade receivables and trade payables
approximate their fair values. In addition, as the interest rate on
the Project Facility is floating and has no unusual rights or terms, the
carrying value approximates its fair value.
17.
|
SEGMENTED
INFORMATION
|
Apollo
operates the Montana Tunnels mine (a 50% joint venture) in the United States and
the Black Fox mine and mill in Canada. The reportable segments have
been determined at the level where decisions are made on the allocation of
resources and capital and where performance is measured. The segment
information for Montana Tunnels assets and liabilities and the results of
operations are reported under the proportionate consolidation method as a result
of the JV Agreement (Note 4). The Montana Tunnels assets and
liabilities and results of operations of the Montana Tunnels joint venture
disclosed in Note 4 differ from the amounts below due to the inclusion of assets
and liabilities and results of operations of Montana Tunnels Mining, Inc. not
pertaining to the Montana Tunnels joint venture which primarily relate to the
Diamond Hill mine. The accounting policies for these segments are the
same as those followed by the Company as a whole.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
17. SEGMENTED
INFORMATION (continued)
Amounts
as at June 30, 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
898 |
|
|
$ |
27 |
|
|
$ |
909 |
|
|
$ |
1,834 |
|
Other
non-cash current assets
|
|
|
1,383 |
|
|
|
8,900 |
|
|
|
6,177 |
|
|
|
16,460 |
|
|
|
|
2,281 |
|
|
|
8,927 |
|
|
|
7,086 |
|
|
|
18,294 |
|
Derivative
instruments
|
|
|
– |
|
|
|
– |
|
|
|
1,773 |
|
|
|
1,773 |
|
Long-term
investments
|
|
|
– |
|
|
|
– |
|
|
|
1,094 |
|
|
|
1,094 |
|
Property,
plant and equipment
|
|
|
7,172 |
|
|
|
127,339 |
|
|
|
3,022 |
|
|
|
137,533 |
|
Restricted
certificates of deposit
|
|
|
8,209 |
|
|
|
13,373 |
|
|
|
8 |
|
|
|
21,590 |
|
Other
long-term assets
|
|
|
– |
|
|
|
107 |
|
|
|
– |
|
|
|
107 |
|
Total
assets
|
|
$ |
17,662 |
|
|
$ |
149,746 |
|
|
$ |
12,983 |
|
|
$ |
180,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$ |
1,973 |
|
|
$ |
32,128 |
|
|
$ |
10,769 |
|
|
$ |
44,870 |
|
Derivative
instruments
|
|
|
– |
|
|
|
– |
|
|
|
13,024 |
|
|
|
13,024 |
|
Debt
and other long-term liabilities
|
|
|
– |
|
|
|
44,411 |
|
|
|
330 |
|
|
|
44,741 |
|
Accrued
site closure costs
|
|
|
9,527 |
|
|
|
4,552 |
|
|
|
– |
|
|
|
14,079 |
|
Future
income tax liability
|
|
|
– |
|
|
|
393 |
|
|
|
– |
|
|
|
393 |
|
Total
liabilities
|
|
$ |
11,500 |
|
|
$ |
81,484 |
|
|
$ |
24,123 |
|
|
$ |
117,107 |
|
Amounts
at December 31, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
12 |
|
|
$ |
214 |
|
|
$ |
2,871 |
|
|
$ |
3,097 |
|
Other
non-cash current assets
|
|
|
5,425 |
|
|
|
9,805 |
|
|
|
3,156 |
|
|
|
18,386 |
|
|
|
|
5,437 |
|
|
|
10,019 |
|
|
|
6,027 |
|
|
|
21,483 |
|
Long-term
investments
|
|
|
– |
|
|
|
– |
|
|
|
1,081 |
|
|
|
1,081 |
|
Property,
plant and equipment
|
|
|
7,655 |
|
|
|
85,183 |
|
|
|
3,043 |
|
|
|
95,881 |
|
Deferred
stripping costs
|
|
|
1,052 |
|
|
|
– |
|
|
|
– |
|
|
|
1,052 |
|
Restricted
certificates of deposit
|
|
|
8,209 |
|
|
|
3,813 |
|
|
|
8 |
|
|
|
12,030 |
|
Other
long-term assets
|
|
|
– |
|
|
|
103 |
|
|
|
– |
|
|
|
103 |
|
Total
assets
|
|
$ |
22,353 |
|
|
$ |
99,118 |
|
|
$ |
10,159 |
|
|
$ |
131,630 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$ |
4,376 |
|
|
$ |
26,925 |
|
|
$ |
9,113 |
|
|
$ |
40,414 |
|
Debt
and other long-term liabilities
|
|
|
44 |
|
|
|
967 |
|
|
|
4,888 |
|
|
|
5,899 |
|
Accrued
site closure costs
|
|
|
9,165 |
|
|
|
1,398 |
|
|
|
– |
|
|
|
10,563 |
|
Future
income tax liability
|
|
|
– |
|
|
|
447 |
|
|
|
– |
|
|
|
447 |
|
Deferred
gain
|
|
|
552 |
|
|
|
– |
|
|
|
– |
|
|
|
552 |
|
Total
liabilities
|
|
$ |
14,137 |
|
|
$ |
29,737 |
|
|
$ |
14,001 |
|
|
$ |
57,875 |
|
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
17. SEGMENTED
INFORMATION (continued)
Amounts
for the three and six month periods ended June 30, 2009 and 2008, respectively,
are as follows:
|
|
Three
months ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from sale of minerals
|
|
$ |
2,849 |
|
|
$ |
4,709 |
|
|
$ |
– |
|
|
$ |
7,558 |
|
Direct
operating costs
|
|
|
3,010 |
|
|
|
2,034 |
|
|
|
– |
|
|
|
5,044 |
|
Depreciation
and amortization
|
|
|
168 |
|
|
|
1,238 |
|
|
|
11 |
|
|
|
1,417 |
|
General
and administrative expenses
|
|
|
– |
|
|
|
– |
|
|
|
1,096 |
|
|
|
1,096 |
|
Accretion
expense – accrued site closure costs
|
|
|
181 |
|
|
|
69 |
|
|
|
– |
|
|
|
250 |
|
Amortization
of deferred gain
|
|
|
(97 |
) |
|
|
– |
|
|
|
– |
|
|
|
(97 |
) |
Exploration
and business development
|
|
|
– |
|
|
|
48 |
|
|
|
254 |
|
|
|
302 |
|
|
|
|
3,262 |
|
|
|
3,389 |
|
|
|
1,361 |
|
|
|
8,012 |
|
Operating
(loss) income
|
|
|
(413 |
) |
|
|
1,320 |
|
|
|
(1,361 |
) |
|
|
(454 |
) |
Interest
income
|
|
|
– |
|
|
|
– |
|
|
|
38 |
|
|
|
38 |
|
Interest
expense
|
|
|
(21 |
) |
|
|
(1,098 |
) |
|
|
(315 |
) |
|
|
(1,434 |
) |
Debt
transaction costs
|
|
|
– |
|
|
|
(10 |
) |
|
|
– |
|
|
|
(10 |
) |
Realized
losses on derivative contracts
|
|
|
– |
|
|
|
– |
|
|
|
(492 |
) |
|
|
(492 |
) |
Unrealized
gains on derivative contracts
|
|
|
– |
|
|
|
– |
|
|
|
3,376 |
|
|
|
3,376 |
|
Foreign
exchange gain and other
|
|
|
– |
|
|
|
1 |
|
|
|
241 |
|
|
|
242 |
|
(Loss)
income before income taxes
|
|
$ |
(434 |
) |
|
$ |
213 |
|
|
$ |
1,487 |
|
|
$ |
1,266 |
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment expenditures and deferred stripping
expenditures
|
|
$ |
9 |
|
|
$ |
18,580 |
|
|
$ |
– |
|
|
$ |
18,589 |
|
|
|
Six
months ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from sale of minerals
|
|
$ |
10,219 |
|
|
$ |
4,709 |
|
|
$ |
– |
|
|
$ |
14,928 |
|
Direct
operating costs
|
|
|
11,413 |
|
|
|
2,034 |
|
|
|
– |
|
|
|
13,447 |
|
Depreciation
and amortization
|
|
|
469 |
|
|
|
1,238 |
|
|
|
21 |
|
|
|
1,728 |
|
General
and administrative expenses
|
|
|
– |
|
|
|
– |
|
|
|
2,028 |
|
|
|
2,028 |
|
Accretion
expense – accrued site closure costs
|
|
|
362 |
|
|
|
69 |
|
|
|
– |
|
|
|
431 |
|
Amortization
of deferred gain
|
|
|
(552 |
) |
|
|
– |
|
|
|
– |
|
|
|
(552 |
) |
Exploration
and business development
|
|
|
– |
|
|
|
112 |
|
|
|
417 |
|
|
|
529 |
|
|
|
|
11,692 |
|
|
|
3,453 |
|
|
|
2,466 |
|
|
|
17,611 |
|
Operating
(loss) income
|
|
|
(1,473 |
) |
|
|
1,256 |
|
|
|
(2,466 |
) |
|
|
(2,683 |
) |
Interest
income
|
|
|
7 |
|
|
|
– |
|
|
|
78 |
|
|
|
85 |
|
Interest
expense
|
|
|
(50 |
) |
|
|
(1,098 |
) |
|
|
(1,313 |
) |
|
|
(2,461 |
) |
Debt
transaction costs
|
|
|
– |
|
|
|
(582 |
) |
|
|
(1,239 |
) |
|
|
(1,821 |
) |
Loss
on modification of convertible debentures
|
|
|
– |
|
|
|
– |
|
|
|
(1,969 |
) |
|
|
(1,969 |
) |
Realized
losses on derivative contracts
|
|
|
– |
|
|
|
– |
|
|
|
(124 |
) |
|
|
(124 |
) |
Unrealized
losses on derivative contracts
|
|
|
– |
|
|
|
– |
|
|
|
(15,042 |
) |
|
|
(15,042 |
) |
Foreign
exchange gain and other
|
|
|
– |
|
|
|
1 |
|
|
|
338 |
|
|
|
339 |
|
Loss
before income taxes
|
|
$ |
(1,516 |
) |
|
$ |
(423 |
) |
|
$ |
(21,737 |
) |
|
$ |
(23,676 |
) |
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment expenditures and deferred stripping
expenditures
|
|
$ |
9 |
|
|
$ |
40,446 |
|
|
$ |
– |
|
|
$ |
40,455 |
|
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
17. SEGMENTED
INFORMATION (continued)
|
|
Three
months ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from sale of minerals
|
|
$ |
10,019 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
10,019 |
|
Direct
operating costs
|
|
|
9,469 |
|
|
|
– |
|
|
|
– |
|
|
|
9,469 |
|
Depreciation
and amortization
|
|
|
327 |
|
|
|
– |
|
|
|
28 |
|
|
|
355 |
|
General
and administrative expenses
|
|
|
– |
|
|
|
– |
|
|
|
1,159 |
|
|
|
1,159 |
|
Accretion
expense – accrued site closure costs
|
|
|
178 |
|
|
|
– |
|
|
|
– |
|
|
|
178 |
|
Amortization
of deferred gain
|
|
|
(369 |
) |
|
|
– |
|
|
|
– |
|
|
|
(369 |
) |
Exploration
and business development
|
|
|
– |
|
|
|
25 |
|
|
|
976 |
|
|
|
1,001 |
|
|
|
|
9,605 |
|
|
|
25 |
|
|
|
2,163 |
|
|
|
11,793 |
|
Operating
income (loss)
|
|
|
414 |
|
|
|
(25 |
) |
|
|
(2,163 |
) |
|
|
(1,774 |
) |
Interest
income
|
|
|
38 |
|
|
|
– |
|
|
|
45 |
|
|
|
83 |
|
Interest
expense
|
|
|
(102 |
) |
|
|
– |
|
|
|
(919 |
) |
|
|
(1,021 |
) |
Realized
gains on derivative contracts
|
|
|
– |
|
|
|
– |
|
|
|
1,432 |
|
|
|
1,432 |
|
Unrealized
gains on derivative contracts
|
|
|
– |
|
|
|
– |
|
|
|
122 |
|
|
|
122 |
|
Foreign
exchange loss and other
|
|
|
– |
|
|
|
– |
|
|
|
(108 |
) |
|
|
(108 |
) |
Income
(loss) before income taxes
|
|
$ |
350 |
|
|
$ |
(25 |
) |
|
$ |
(1,591 |
) |
|
$ |
(1,266 |
) |
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment expenditures and deferred stripping
expenditures
|
|
$ |
98 |
|
|
$ |
3,673 |
|
|
$ |
42 |
|
|
$ |
3,813 |
|
|
|
Six
months ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
from sale of minerals
|
|
$ |
25,921 |
|
|
$ |
– |
|
|
$ |
– |
|
|
$ |
25,921 |
|
Direct
operating costs
|
|
|
18,530 |
|
|
|
– |
|
|
|
– |
|
|
|
18,530 |
|
Depreciation
and amortization
|
|
|
705 |
|
|
|
– |
|
|
|
54 |
|
|
|
759 |
|
General
and administrative expenses
|
|
|
– |
|
|
|
– |
|
|
|
2,088 |
|
|
|
2,088 |
|
Accretion
expense – accrued site closure costs
|
|
|
355 |
|
|
|
– |
|
|
|
– |
|
|
|
355 |
|
Amortization
of deferred gain
|
|
|
(924 |
) |
|
|
– |
|
|
|
– |
|
|
|
(924 |
) |
Exploration
and business development
|
|
|
– |
|
|
|
50 |
|
|
|
1,707 |
|
|
|
1,757 |
|
|
|
|
18,666 |
|
|
|
50 |
|
|
|
3,849 |
|
|
|
22,565 |
|
Operating
income (loss)
|
|
|
7,255 |
|
|
|
(50 |
) |
|
|
(3,849 |
) |
|
|
3,356 |
|
Interest
income
|
|
|
90 |
|
|
|
– |
|
|
|
119 |
|
|
|
209 |
|
Interest
expense
|
|
|
(214 |
) |
|
|
– |
|
|
|
(1,955 |
) |
|
|
(2,169 |
) |
Realized
gains on derivative contracts
|
|
|
– |
|
|
|
– |
|
|
|
1,950 |
|
|
|
1,950 |
|
Unrealized
gains on derivative contracts
|
|
|
– |
|
|
|
– |
|
|
|
(733 |
) |
|
|
(733 |
) |
Foreign
exchange loss and other
|
|
|
– |
|
|
|
– |
|
|
|
(225 |
) |
|
|
(225 |
) |
Income
(loss) before income taxes
|
|
$ |
7,131 |
|
|
$ |
(50 |
) |
|
$ |
(4,693 |
) |
|
$ |
2,388 |
|
Investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment expenditures and deferred stripping
expenditures
|
|
$ |
178 |
|
|
$ |
4,849 |
|
|
$ |
42 |
|
|
$ |
5,069 |
|
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
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 U.S. Securities
and Exchange Commission at June 30, 2009 and December 31, 2008 and for the three
and six months ended June 30, 2009 and 2008.
Material
variances between financial statement items under Canadian GAAP and the amounts
determined under U.S. GAAP are as follows:
|
|
|
|
|
|
|
Total
assets in accordance with Canadian GAAP
|
|
$ |
180,391 |
|
|
$ |
131,630 |
|
Bank
indebtedness
|
|
|
– |
|
|
|
(742 |
) |
Equity
accounting for investment in Montana Tunnels joint venture
(b)(i)
|
|
|
(10,484 |
) |
|
|
(12,864 |
) |
Impairment
of property, plant and equipment, and change in depreciation and
amortization(b)(ii)
|
|
|
(1,558 |
) |
|
|
(1,617 |
) |
Deferred
stripping costs (b)(iii)
|
|
|
– |
|
|
|
(1,052 |
) |
Black
Fox Project (c)
|
|
|
(28,897 |
) |
|
|
(29,159 |
) |
Convertible
debentures (d)
|
|
|
– |
|
|
|
66 |
|
Total
assets in accordance with U.S. GAAP
|
|
$ |
139,452 |
|
|
$ |
86,262 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities in accordance with Canadian GAAP
|
|
$ |
117,107 |
|
|
$ |
57,875 |
|
Bank
indebtedness
|
|
|
– |
|
|
|
(742 |
) |
Debt
transactions costs (a)
|
|
|
(521 |
) |
|
|
– |
|
Equity
accounting for investment in Montana Tunnels joint venture
(b)(i)
|
|
|
(10,484 |
) |
|
|
(12,864 |
) |
Deferred
gain (b)(i)
|
|
|
– |
|
|
|
(552 |
) |
Convertible
debentures (d)
|
|
|
359 |
|
|
|
118 |
|
Income
taxes related to flow-through share issuance (e)
|
|
|
– |
|
|
|
73 |
|
Warrants
treated as liabilities under EITF 07-5 (h)
|
|
|
29,887 |
|
|
|
– |
|
Total
liabilities in accordance with U.S. GAAP
|
|
$ |
136,348 |
|
|
$ |
43,908 |
|
|
|
|
|
|
|
|
|
|
Total
shareholders’ equity in accordance with Canadian GAAP
|
|
$ |
63,284 |
|
|
$ |
73,755 |
|
Debt
transactions costs (a)
|
|
|
557 |
|
|
|
– |
|
Deferred
gain (b)(i)
|
|
|
– |
|
|
|
552 |
|
Impairment
of property, plant and equipment, and change in depreciation and
amortization(b)(ii)
|
|
|
(1,558 |
) |
|
|
(1,617 |
) |
Deferred
stripping costs (b)(iii)
|
|
|
– |
|
|
|
(1,052 |
) |
Black
Fox Project (c)
|
|
|
(28,933 |
) |
|
|
(29,159 |
) |
Convertible
debentures (d)
|
|
|
(359 |
) |
|
|
(52 |
) |
Income
taxes related to flow-through share issuance (e)
|
|
|
– |
|
|
|
(73 |
) |
Warrants
treated as liabilities under EITF 07-5 (h)
|
|
|
(29,887 |
) |
|
|
– |
|
Total
shareholders’ equity in accordance with U.S. GAAP
|
|
$ |
3,104 |
|
|
$ |
42,354 |
|
|
|
|
|
|
|
|
|
|
Total
shareholders’ equity and liabilities in accordance with U.S.
GAAP
|
|
$ |
139,452 |
|
|
$ |
86,262 |
|
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
18. DIFFERENCES
BETWEEN CANADIAN AND U.S. GAAP (continued)
Under
U.S. GAAP, the components of shareholders’ equity would be as
follows:
|
|
|
|
|
|
|
Share
capital
|
|
$ |
192,627 |
|
|
$ |
189,451 |
|
Note
warrants
|
|
|
– |
|
|
|
2,234 |
|
Contributed
surplus
|
|
|
45,146 |
|
|
|
48,241 |
|
Deficit
|
|
|
(234,669 |
) |
|
|
(197,572 |
) |
Total
shareholders’ equity in accordance with U.S. GAAP
|
|
$ |
3,104 |
|
|
$ |
42,354 |
|
Under
U.S. GAAP, the net (loss) income and earnings per share would be adjusted as
follows:
|
|
Three
months ended
June
30,
|
|
|
Six
months ended
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) for the period, based on Canadian GAAP
|
|
$ |
1,266 |
|
|
$ |
(1,329 |
) |
|
$ |
(23,487 |
) |
|
$ |
2,325 |
|
Debt
transaction costs (a)
|
|
|
(15 |
) |
|
|
(54 |
) |
|
|
557 |
|
|
|
(107 |
) |
Amortization
of deferred gain (b)(i)
|
|
|
(97 |
) |
|
|
(369 |
) |
|
|
(552 |
) |
|
|
(924 |
) |
Change
in depreciation of property, plant and equipment (b)(ii)
|
|
|
15 |
|
|
|
39 |
|
|
|
59 |
|
|
|
92 |
|
Capitalized
deferred stripping and amortization (b)(iii)
|
|
|
184 |
|
|
|
704 |
|
|
|
1,052 |
|
|
|
1,762 |
|
Black
Fox Project (c)
|
|
|
226 |
|
|
|
(1,137 |
) |
|
|
226 |
|
|
|
(2,332 |
) |
Convertible
debentures (d)
|
|
|
109 |
|
|
|
233 |
|
|
|
277 |
|
|
|
(1,097 |
) |
Warrants
treated as liabilities under EITF 07-5 (h)
|
|
|
(8,829 |
) |
|
|
– |
|
|
|
(13,582 |
) |
|
|
– |
|
Income
taxes (f)
|
|
|
– |
|
|
|
– |
|
|
|
(116 |
) |
|
|
628 |
|
Net
(loss) income for the period based on U.S. GAAP
|
|
$ |
(7,141 |
) |
|
$ |
(1,913 |
) |
|
$ |
(35,566 |
) |
|
$ |
347 |
|
Comprehensive
income (loss) based on U.S. GAAP
|
|
$ |
(7,141 |
) |
|
$ |
(1,913 |
) |
|
$ |
(35,566 |
) |
|
$ |
347 |
|
Basic
and diluted net (loss) income per share in accordance with U.S.
GAAP
|
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.15 |
) |
|
$ |
0.00 |
|
Under
U.S. GAAP, the consolidated statements of cash flows would be adjusted as
follows:
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
18. DIFFERENCES
BETWEEN CANADIAN AND U.S. GAAP (continued)
|
|
Three
months ended
June
30,
|
|
|
Six
months ended
June
30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
(used in) provided by operating activities based on Canadian
GAAP
|
|
$ |
(2,738 |
) |
|
$ |
4,162 |
|
|
$ |
(1,182 |
) |
|
$ |
5,582 |
|
Debt
transaction costs (a)
|
|
|
– |
|
|
|
– |
|
|
|
572 |
|
|
|
– |
|
Equity
accounting for investment in Montana Tunnels joint venture
(b)(i)
|
|
|
(628 |
) |
|
|
(3,987 |
) |
|
|
(1,835 |
) |
|
|
(8,811 |
) |
Black
Fox Project (c)
|
|
|
– |
|
|
|
(1,137 |
) |
|
|
– |
|
|
|
(2,332 |
) |
Cash
used in operating activities based on U.S. GAAP
|
|
|
(3,366 |
) |
|
|
(962 |
) |
|
|
(2,445 |
) |
|
|
(5,561 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
used in investing activities based on Canadian GAAP
|
|
|
(27,733 |
) |
|
|
(4,571 |
) |
|
|
(44,519 |
) |
|
|
(6,403 |
) |
Equity
accounting for investment in Montana Tunnels joint venture
(b)(i)
|
|
|
2 |
|
|
|
684 |
|
|
|
9 |
|
|
|
1,361 |
|
Black
Fox Project (c)
|
|
|
– |
|
|
|
1,137 |
|
|
|
– |
|
|
|
2,332 |
|
Restricted
cash for Canadian flow-through expenditures (e)
|
|
|
– |
|
|
|
1,864 |
|
|
|
3,825 |
|
|
|
2,609 |
|
Cash
used in investing activities based on U.S. GAAP
|
|
|
(27,731 |
) |
|
|
(886 |
) |
|
|
(40,685 |
) |
|
|
(101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
provided by financing activities based on Canadian GAAP
|
|
|
27,018 |
|
|
|
(1,827 |
) |
|
|
44,347 |
|
|
|
(3,385 |
) |
Debt
transaction costs (a)
|
|
|
– |
|
|
|
– |
|
|
|
(572 |
) |
|
|
– |
|
Equity
accounting for investment in Montana Tunnels joint venture
(b)(i)
|
|
|
273 |
|
|
|
3,164 |
|
|
|
940 |
|
|
|
7,303 |
|
Cash
provided by financing activities based on U.S. GAAP
|
|
|
27,291 |
|
|
|
1,337 |
|
|
|
44,715 |
|
|
|
3,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
95 |
|
|
|
(30 |
) |
|
|
91 |
|
|
|
(44 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash (outflow) inflow in accordance with U.S. GAAP
|
|
|
(3,711 |
) |
|
|
(541 |
) |
|
|
1,676 |
|
|
|
(1,788 |
) |
Cash
(bank indebtedness), beginning of period under U.S. GAAP
|
|
|
4,645 |
|
|
|
87 |
|
|
|
(742 |
) |
|
|
1,334 |
|
Cash
(bank indebtedness), end of period under U.S. GAAP
|
|
$ |
934 |
|
|
$ |
(454 |
) |
|
$ |
934 |
|
|
$ |
(454 |
) |
(a)
|
Debt
transaction costs
|
Under
Canadian GAAP, the Company expenses debt transaction costs when they are
incurred. Under U.S. GAAP, debt transaction costs are capitalized and
amortized over the term of the related debt. Accordingly, for U.S.
GAAP purposes, cumulative adjustments of a $0.5 million reduction in debt and a
$0.6 million reduction in deficit have been recorded as at June 30,
2009.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
18. DIFFERENCES
BETWEEN CANADIAN AND U.S. GAAP (continued)
(i) Joint
venture
Under
Canadian GAAP, the Company has accounted for its joint venture interest in the
Montana Tunnels mine (“MTM”) using the proportionate consolidation method
whereby the Company’s proportionate share of each line item of MTM’s assets,
liabilities, revenues and expenses is included in the corresponding line item of
the Company's financial statements (Note 4). Under U.S. GAAP, the Company
would account for MTM using the equity method whereby the Company's share of the
investee’s earnings and losses is included in operations and its investments
therein are adjusted by a similar amount. The carrying value of MTM was
lower under U.S. GAAP than under Canadian GAAP following an impairment of the
property, plant and equipment in prior years and as a result the gain on
transfer of the Company's interest in MTM into the joint venture under U.S. GAAP
is higher. Under U.S. GAAP the gain on transfer of the Company's
interest in MTM into the joint venture was included in the net loss for the year
ended December 31, 2006; whereas under Canadian GAAP it was deferred and is
recognized as an adjustment to net income using the units-of-production method
over the expected life of mine based on the recoverable gold equivalent
ounces. The adjustments to reconcile between Canadian GAAP and U.S.
GAAP for Montana Tunnels have been presented separately rather than being
presented as a single equity accounting adjustment. The Company believes
that this presentation provides more detailed information to a reader of the
financial statements enabling the reader to reconcile the individual adjustments
to the primary Canadian GAAP financial statements and footnotes.
(ii) Impairment
of property, plant and equipment
Under
Canadian GAAP, write-downs for impairment of property, plant and equipment are
determined using current proven and probable reserves and mineral resources
expected to be converted into mineral reserves. In 2002, under U.S.
GAAP, write-downs were determined using current proven and probable reserves
only and did not include mineral resources expected to be converted in to
mineral reserves. Accordingly, for U.S. GAAP purposes, an impairment
of property, plant and equipment and an adjustment to the related depreciation
has been recorded.
(iii) Deferred
stripping costs
Under
Canadian GAAP, stripping costs that represent a betterment to the mineral
property are capitalized and amortized using the units-of-production method over
the expected life of the mine based on the estimated recoverable gold equivalent
ounces. Under U.S. GAAP, stripping costs incurred during the
production stage of a mine are included in the cost of inventory produced during
the period in which the stripping costs were incurred.
Effective
April 2008, under U.S. GAAP, mining development costs at the Black Fox Project
are capitalized as they are under Canadian GAAP. Prior to April 2008,
mining development costs at the Black Fox Project were expensed as incurred
under U.S. GAAP. Accordingly, for U.S. GAAP purposes, a cumulative
reduction in property, plant and equipment of $29.2 million has been recorded as
at June 30, 2009. Effective May 2009, the Black Fox Project commenced
commercial production under both Canadian and U.S. GAAP. As a result
of the $29.2 million difference described above, adjustments to inventories;
property, plant and equipment, and the related amortization of development costs
have been recorded.
(d)
|
Convertible
debentures
|
Under
Canadian GAAP, the Extended Debentures were recorded as a compound financial
instrument. Under U.S. GAAP, the Extended Debentures are treated as a
liability.
(e)
|
Flow-through
common shares
|
Under
Canadian income tax legislation, a company is permitted to issue shares whereby
the Company agrees to incur qualifying expenditures and renounce the related
income tax deductions to the investors. The Company has accounted for
the issue of flow-through shares using the deferral method in accordance with
Canadian GAAP. At the time of issue, the funds received are recorded
as share capital.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
18. DIFFERENCES
BETWEEN CANADIAN AND U.S. GAAP (continued)
The
Financial Accounting Standards Board (“FASB”) staff has taken the view that
under SFAS No. 109, Accounting
for Income Taxes, the proceeds from issuance should be allocated between
the offering of shares and the sale of tax benefits. The allocation
is made based on the difference between the quoted price of the existing shares
and the amount the investor pays for the shares. A liability is
recognized for this difference. The liability is reversed when tax
benefits are renounced and a deferred tax liability is recognized at that
time. Income tax expense is the difference between the amount of a
deferred tax liability and the liability recognized on issuance.
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 June 30, 2009, the Company had no
unexpended flow-through funds (December 31, 2008 – $3.8 million).
While tax
accounting rules are essentially the same under both U.S. and Canadian GAAP, tax
account differences can arise from differing treatment of various assets and
liabilities. For example, certain mine developments cost are
capitalized under Canadian GAAP and expensed under U.S. GAAP, as explained
in (c) above. An analysis of these differences indicates that there
are larger potential tax benefits under U.S. GAAP than under Canadian GAAP
but a valuation allowance has been applied to all the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FASB Interpretation 48, Accounting for Uncertainty in Income
Taxes, requires that the Company recognize in its consolidated financial
statements only those tax positions that are “more-likely-than-not” of being
sustained as of the adoption date, based on the technical merits of the
position.
Under
current conditions and expectations, the Company does not foresee any
significant changes in unrecognized tax benefits that would have a material
impact on the Company’s financial statements. The Company and/or one
of its subsidiaries are subject to the material taxing jurisdictions of the
United States and Canada. The Company is generally not subject to
examinations that could create a tax liability for tax years before 2004 by the
Internal Revenue Service and before 2001 by Revenue Canada. The
Company recognizes interest accrued related to unrecognized tax benefits in
interest expense and penalties in operating expenses. The Company has
not accrued interest or penalties related to uncertain tax positions as of June
30, 2009.
(g)
|
Derivative
instruments
|
The
following additional tabular presentation of derivative instruments is required
by U.S. GAAP under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities (“SFAS 133”) and SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities (“SFAS 161”).
There
were no derivatives designated as hedging instruments under SFAS 133 at either
June 30, 2009 or December 31, 2008. There were no differences in
classification or valuation of derivative instruments between U.S. GAAP and
Canadian GAAP at either June 30, 2009 or December 31, 2008. Refer to
Notes 5 and 8(b) for further discussion of derivative
instruments.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
18. DIFFERENCES
BETWEEN CANADIAN AND U.S. GAAP (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives
not designated as hedging instruments under SFAS 133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold
forward contracts
|
|
|
n/a
|
|
|
$ |
– |
|
|
Derivative
instruments
|
|
|
$ |
54 |
|
|
Derivative
instruments
|
|
|
$ |
16,732 |
|
|
|
n/a
|
|
|
$ |
– |
|
Silver
forward contracts
|
|
|
n/a
|
|
|
|
– |
|
|
Derivative
instruments
|
|
|
|
139 |
|
|
|
n/a
|
|
|
|
– |
|
|
|
n/a
|
|
|
|
– |
|
Lead
forward contracts
|
|
|
n/a
|
|
|
|
– |
|
|
Derivative
instruments
|
|
|
|
359 |
|
|
|
n/a
|
|
|
|
– |
|
|
|
n/a
|
|
|
|
– |
|
Canadian
currency forward contracts
|
|
Derivative
instruments
|
|
|
|
2,242 |
|
|
|
n/a
|
|
|
|
– |
|
|
|
n/a
|
|
|
|
– |
|
|
|
n/a
|
|
|
|
– |
|
Total
derivatives
|
|
|
|
|
|
$ |
2,242 |
|
|
|
|
|
|
$ |
552 |
|
|
|
|
|
|
$ |
16,732 |
|
|
|
|
|
|
$ |
– |
|
(h)
|
Adoption
of recently issued accounting
pronouncements
|
In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
(“SFAS 157”). This statement defines fair value, establishes
guidelines for measuring fair value and expands disclosures regarding fair value
measurements. SFAS 157 does not require any new fair value
measurements but rather eliminates inconsistencies in guidance found in various
prior accounting pronouncements. The provisions of SFAS 157 were
adopted January 1, 2008.
All of
the Company’s financial assets and liabilities are measured at fair value using
Level 1 inputs with the exception of (1) derivative contracts which use Level 2
inputs and (2) auction rate securities which use Level 3 inputs (See Note
7). The adoption of SFAS 157 did not have a material impact on the
Company’s financial position, results of operations or cash flows.
In
February 2008, the FASB issued FSP No. 157-2, Effective Date of FASB Statement No.
157 (“FSP FAS 157-2”). FSP FAS 157-2 delayed the effective
date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except
for items that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). The provisions
of FSP FAS 157-2 were adopted January 1, 2009. The adoption of FSP
FAS 157-2 had no impact on the Company’s financial position, results of
operations, or cash flows.
In
October 2008, the FASB issued FSP No. FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active (“FSP FAS
157-3”), which clarifies the application of SFAS 157 in an inactive
market. The intent of this FSP is to provide guidance on how the fair
value of a financial asset is to be determined when the market for that
financial asset is inactive. FSP FAS 157-3 states that determining
fair value in an inactive market depends on the facts and circumstances,
requires the use of significant judgment and in some cases, observable inputs
may require significant adjustment based on unobservable data. Regardless of the
valuation technique used, an entity must include appropriate risk adjustments
that market participants would make for nonperformance and liquidity risks when
determining fair value of an asset in an inactive market. FSP FAS
157-3 was effective upon issuance. We have incorporated the
principles of FSP FAS 157-3 in determining the fair value of financial assets
when the market for those assets is not active, specifically its auction rate
securities.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
18. DIFFERENCES
BETWEEN CANADIAN AND U.S. GAAP (continued)
In April
2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly (“FSP FAS
157-4”), which provides additional guidance on determining fair value when the
volume and level of activity for an asset or liability have significantly
decreased and includes guidance on identifying circumstances that indicate when
a transaction is not orderly. The provisions of FSP FAS 157-4 were
adopted April 1, 2009. The adoption of FSP FAS 157-4 did not have an
impact on the Company’s fair value measurements.
SFAS 157
establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements). The three levels of the fair value
hierarchy under SFAS 157 are described below:
|
Level 1
|
Unadjusted
quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or
liabilities;
|
|
Level 2
|
Quoted
prices in markets that are not active, or inputs that are observable,
either directly or indirectly, for substantially the full term of the
asset or liability;
|
|
Level 3
|
Prices
or valuation techniques that require inputs that are both significant to
the fair value measurement and unobservable (supported by little or no
market activity).
|
The
Company’s derivative instruments (see Note 5 and Note 8(b)) and auction rate
securities (see Note 7) represent those financial assets and liabilities
measured at fair value by level within the fair value hierarchy. As
required by SFAS 157, assets and liabilities are classified in their entirety
based on the lowest level of input that is significant to the fair value
measurement.
Our
derivative instruments are valued using market prices. Our
derivatives trade in liquid markets, and as such, market prices can generally be
verified and do not involve significant management judgment. Such
instruments are classified within Level 2 of the fair value
hierarchy.
Our
auction rate securities are reviewed for fair value on at least a quarterly
basis. The auction rate securities are traded in markets that are not
active, trade infrequently and have little price transparency. We
estimated the fair values based on weighted average risk calculations using
probabilistic cash flow assumptions. The auction rate securities are
classified within Level 3 of the fair value hierarchy.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS
141(R)”). SFAS 141(R) establishes principles and requirements for how
an acquirer recognizes and measures in its financial statements the identifiable
assets acquired, the liabilities assumed, any noncontrolling interest in the
acquiree and the goodwill acquired. SFAS 141(R) also establishes
disclosure requirements to enable the evaluation of the nature and financial
effects of the business combination. The provisions of SFAS 141(R)
were adopted January 1, 2009. The adoption of SFAS 141(R) had no
impact on the Company’s financial position, results of operations, or cash
flows.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
18. DIFFERENCES
BETWEEN CANADIAN AND U.S. GAAP (continued)
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an Amendment of Accounting Research Bulletin
No. 51 (“SFAS 160”). SFAS 160 establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the
parent and to the noncontrolling interest, changes in a parent’s ownership
interest, and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. SFAS 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. The provisions
of SFAS 160 were adopted January 1, 2009. The adoption of SFAS 160
had no impact on the Company’s financial position, results of operations, or
cash flows.
In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities (SFAS 161). The new
standard is intended to improve financial reporting about derivative instruments
and hedging activities by requiring enhanced disclosures to enable investors to
better understand their effects on an entity’s financial position, financial
performance, and cash flows. The provisions of SFAS 161 were adopted
January 1, 2009. The adoption of SFAS 161 had no impact on the
Company’s financial position, results of operations, or cash flows.
In May
2008, the FASB issued FSP No. APB 14-1, Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (including Partial Cash
Settlements) (“FSP APB 14-1”). This FSP clarifies that
convertible debt instruments that may be settled in cash upon conversion
(including partial cash settlement) are not addressed by paragraph 12 of APB
Opinion No. 14, Accounting for
Convertible Debt and Debt Issued with Stock Purchase
Warrants. Additionally, this FSP specifies that issuers of
such instruments should separately account for the liability and equity
components in a manner that will reflect the entity’s nonconvertible debt
borrowing rate when interest cost is recognized in subsequent
periods. As the Company has had no convertible debt instruments that
could be settled in cash upon conversion, whether in full or partially, the
adoption of FSP APB 14-1 had no impact on the Company’s financial position,
results of operations, or cash flows.
In June
2008, the FASB issued FSP No. EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities
(“FSP EITF 03-6-1”). This FSP addresses whether instruments granted in
share-based payment transactions are participating securities prior to vesting
and, therefore, need to be included in the earnings allocation in computing
earnings per share under the two-class method described in SFAS No. 128, Earnings Per
Share. The provisions of FSP EITF 03-6-1 were adopted January
1, 2009. The adoption of FSP EITF 03-6-1 had no impact on the
Company’s financial position, results of operations, cash flows, or earnings per
share data.
In June
2008, the EITF reached consensus on Issue No. 07-5, Determining Whether an Instrument
(or Embedded Feature) Is Indexed to an Entity’s Own Stock (“EITF
07-5”). EITF 07-5 clarifies the determination of whether an
instrument (or an embedded feature) is indexed to an entity’s own stock, which
would qualify as a scope exception under SFAS 133. The provisions of
EITF 07-5 were adopted January 1, 2009.
Under
EITF 07-5, an equity-linked financial instrument (or embedded feature) would not
be considered indexed to the entity’s own stock if the strike price is
denominated in a currency other than the issuer’s functional
currency. As of June 30, 2009 and January 1, 2009, the Company had
106.8 million and 74.6 million outstanding warrants to purchase common shares of
the Company, respectively, that were either (a) denominated in a currency
(Canadian dollars) other than its functional currency (US dollars) or (b)
subject to a potential strike-price adjustment (the warrants issued November 8,
2006 currently exercisable at $0.176) (see Note 10). As such, these
warrants are not considered to be indexed to the Company’s own stock, which
precludes the warrants from meeting the scope exception under SFAS
133. The warrants thereby are accounted for separately as derivative
instruments, rather than as equity instruments. Accordingly, for U.S.
GAAP purposes, the Company assessed the fair value of these warrants as of
January 1, 2009 and recorded a reduction in contributed surplus of $6.94
million, an increase in opening deficit of $1.53 million and an $8.47 million
increase in liabilities. As of June 30, 2009, the Company has
assessed the fair value of these warrants and recorded cumulative adjustments as
follows: a reduction in contributed surplus of $14.8 million, an increase in
deficit of $15.1 million and a $29.9 million increase in
liabilities.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
18.
|
DIFFERENCES
BETWEEN CANADIAN AND U.S. GAAP
(continued)
|
These
warrants were fair valued at January 1 and June 30, 2009 using an option pricing
model with the following assumptions: no dividends are paid, weighted
average volatilities of the Company’s share price of 81% and 79%, weighted
average expected lives of the warrants of 3.2 and 3.1 years, and weighted
average annual risk-free rates of 1.4% and 1.7%, respectively.
In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments. This FSP amends FASB Statement No.
107, Disclosures about Fair
Value of Financial Instruments, to require disclosures about fair value
of financial instruments for interim reporting periods of publicly traded
companies as well as in annual financial statements. This FSP also amends APB
Opinion No. 28, Interim
Financial Reporting, to require those disclosures in summarized financial
information at interim reporting periods. The provisions of this FSP were
adopted April 1, 2009. The adoption of this FSP had no impact on the
Company’s financial position, results of operations, or cash flows.
In May
2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS
165). This new SFAS establishes general standards of
accounting for and disclosure of events that occur after the balance sheet date
but before financial statements are issued or are available to be
issued. This statement became effective for the Company on
June 30, 2009. The Company reviewed events for inclusion in the
financial statements through August 14, 2009, the date that the
accompanying financial statements were issued.
(i)
|
Recently
issued accounting pronouncements
|
In
June 2009, the FASB issued FASB Statement No. 167, Amendments to FASB Interpretation
No. 46(R) (“FAS 167”), which requires an entity to perform a qualitative
analysis to determine whether the enterprise’s variable interest gives it a
controlling financial interest in a variable interest entity (“VIE”). This
analysis identifies a primary beneficiary of a VIE as the entity that has both
of the following characteristics: i) the power to direct the activities of a VIE
that most significantly impact the entity’s economic performance and ii) the
obligation to absorb losses or receive benefits from the entity that could
potentially be significant to the VIE. FAS 167 also amends FIN 46(R)
to require ongoing reassessments of the primary beneficiary of a
VIE. The provisions of FAS 167 are effective for the Company’s fiscal
year beginning January 1, 2010. We do not expect the adoption of
FAS 168 to have an impact on our consolidated financial position, results of
operations or cash flows.
In
June 2009, the FASB issued FASB Statement No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles—a
replacement of FASB Statement No. 162 (“FAS 168” or “the
Codification”). FAS 168 will become the source of authoritative U.S.
GAAP to be applied by nongovernmental entities. Rules and
interpretive releases of the Securities and Exchange Commission (“SEC”) under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. The Codification will supersede all non-SEC
accounting and reporting standards. All other nongrandfathered non-SEC
accounting literature not included in the Codification will become
nonauthoritative. FAS 168 is effective for our interim quarterly
period beginning July 1, 2009. We do not expect the adoption of
FAS 168 to have an impact on our consolidated financial position, results of
operations or cash flows.
APOLLO
GOLD CORPORATION
Notes
to the Condensed Consolidated Financial Statements
Six
month period ended June 30, 2009
(Stated
in U.S. dollars; tabular amounts in thousands except share and per share
data)
(Unaudited)
On July
16, 2009, the Company completed a private placement of 12,221,640 commons shares
at Cdn$0.45 per share and 13,889,390 flow-through shares at C$0.54 per share for
aggregate gross proceeds of Cdn$13.0 million. The Company intends to
use the proceeds from the sale of the flow-through shares to incur exploration
expenses at its Black Fox mine and its Grey Fox property. Further,
the Company intends to use the proceeds from the sale of the common shares for
working capital and general corporate purposes.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
All
Dollar amounts are expressed in United States Dollars
The
following discussion and analysis should be read in conjunction with
‘‘Management’s Discussion and Analysis of Financial Condition and Results of
Operations’’ contained in our Annual Report on Form 10-K for the year ended
December 31, 2008 as well as with the consolidated financial statements and
related notes and the other information appearing elsewhere in this
report. As used in this report, unless the context otherwise
indicates, references to ‘‘we,’’ ‘‘our,’’ “us,” the “Company” or ‘‘Apollo’’
refer to Apollo Gold Corporation and its subsidiaries
collectively. The financial statements in this Form 10-Q have been
prepared in accordance with generally accepted accounting principles in Canada
(Canadian GAAP). For reconciliation to GAAP in the United States
(U.S. GAAP), see Note 18 to the consolidated financial statements set forth
above.
In this
Form 10-Q, the terms “cash operating cost,” “total cash cost” and “total
production cost” are non-GAAP financial measures and are used on a per ounce of
gold sold basis. Cash operating costs per ounce is equivalent to
direct operating cost as found on the Consolidated Statements of Operations,
less production royalty expenses and mining taxes but includes by-product
credits for payable silver, lead, and zinc production. Total cash
costs are equivalent to cash operating costs plus production royalties and
mining taxes. The term “total production costs” is equivalent to
total cash costs plus non-cash costs including depreciation and
amortization. See “Reconciliation of Cash Operating and Total
Production Costs per Ounce” below. References in this Form 10-Q to
“$” are to United States dollars. Canadian dollars are indicated by
the symbol “Cdn$”.
Certain
prior period figures have been reclassified to conform to the current period
presentation. In particular, for the three months and six months
ended June 30, 2008, $1.4 million and $2.0 million, respectively that were
recorded as cash inflows from investing activities have been reclassified to
operating activities in connection with proceeds from the sale of derivative
contracts.
BACKGROUND
AND RECENT DEVELOPMENTS
We are
principally engaged in gold mining including extraction, processing, refining
and the production of other co-product metals, as well as related activities
including the exploration and development of potential mineral properties and
acquisition of mining claims principally in North America. We own
Black Fox, an open pit and underground mine and mill located in the Province of
Ontario, Canada (“Black Fox”). The Black Fox mine site is situated
seven miles east of Matheson and the mill complex is twelve miles west of
Matheson. Mining of ores from the open pit began in March 2009 and
milling operations commenced in April 2009. Underground mining at
Black Fox is expected to commence in 2011.
We are
the operator of the Montana Tunnels mine, which is a 50% joint venture with
Elkhorn Tunnels, LLC (“Elkhorn”). The Montana Tunnels mine is an open
pit mine and mill located near Helena, Montana, which produced gold doré and
lead-gold and zinc-gold concentrates. The Montana Tunnels mine ceased
milling operations on April 30, 2009 and we placed the mine and mill on care and
maintenance at that time.
We also own Mexican subsidiaries which
own an 80 percent interest in the Huizopa Project joint venture, (20 percent
Minas de Coronado, S. de R.L. de CV), an early stage exploration project located
in the Sierra Madres in Chihuahua, Mexico.
Black
Fox
We commenced open pit operations at the
Black Fox mine in mid March, 2009 and during the second quarter we mined
1,100,000 tonnes of material of which 198,000 tonnes was gold ore.
The commissioning of the upgraded mill
commenced in mid April and during the first week of May 2009, the new ball mill
was also brought online. The first gold pour and sales occurred in late May
2009.. During May and June 2009, the mill processed 75,800 tonnes of
ore (1,242 tonnes per day), at a grade of 5.28 grams per tonne, achieving a
recovery of 92.5%, for total gold production of 11,840 ounces. Sales
of gold produced at Black Fox during the second quarter were 5,043 ounces at a
total cash cost of $403 per ounce. During the first week of July we
commissioned the new crushing circuit which enabled us to increase mill
throughput. During the month of July, 2009, 54,600 tonnes of ore
(1,761 tonnes per day) were processed at a grade of 3.6 grams per tonne
achieving a recovery of 92.4% for total gold production of 5,822
ounces. The mill has been processing ore at the rate planned and
recoveries have been satisfactory, however, the grade of ore delivered to the
mill has been lower than expected. As a result, for the three-month
period ended July 31, 2009, gold production was less than 80% of the agreed
amount with the banks involved with the Project Facility (the “Banks”) which
triggered a “review event” as defined in the Project Facility
agreement. Although the occurrence of the “review event” triggers the
foregoing rights of the Banks under the Project Facility, the Banks have
informed us that they continue to support Black Fox and we are confident that
they will not seek a termination of the Project Facility as a result of the
occurrence of the review event. We are taking appropriate steps to
improve grade control and we are engaged in constructive discussions with the
Banks regarding resolving any issues related to the review event including
rescheduling of the quarterly debt repayment installments, beginning September
30, 2009, to better reflect the expected cash flows from production
at Black Fox for the next twelve months. During the third quarter
2009, our objective is to maintain throughput at the mill of 1,800 tonnes per
day, to improve recoveries towards a target of 95% and to optimize the grade of
ore being processed.
Capital expenditures for the three and
six months ended June 30, 2009 were approximately $19 million and $40 million,
respectively, which included (1) $26 million towards the cost of upgrading the
Black Fox mill to increase its throughput rate, (2) $4 million for contract pond
and road construction at the mine site and (3) capitalized expenditures of $10
million including contract pre-stripping of the open pit.
Montana
Tunnels
The
Montana Tunnels mine ceased milling operations on April 30, 2009 and we placed
the mine and mill on care and maintenance at that time. For the month
of May and June, the care and maintenance costs were $0.3 million; Apollo’s
share of these costs is 50%.
During
the month of April 2009, when the mill was operational, the mill processed
343,400 tons of ore from stockpiled ore at an average throughput of 11,447 tons
per day. Payable production was 1,990 ounces of gold, 52,000 ounces
of silver, and 928,000 pounds of lead and 270,000 pounds of
zinc. Apollo’s share of this production is 50%.
Total
cash costs for the month of April 2009 on a by-product basis were $862 per ounce
of gold and on a co-product basis they were $833 per ounce of gold, $12.17 per
ounce of silver, $0.67 per lb of lead and $0.69 per lb of zinc. For
the second quarter 2009, the higher cash costs per ounce of gold on a by-product
basis compared to the second quarter 2008 are mainly the result of a reduction
in by-product credits due to the decline in world zinc and lead
prices combined with the lower grade of zinc processed.
We
have received all necessary permits to expand the current pit, which
expansion plan we refer to as the M Pit project. The M Pit project
would involve a 12 month pre-stripping program that would cost approximately $70
million, during which time no ore would be produced. The decision to
proceed with the M Pit project must be agreed to by both Apollo and our joint
venture partner, Elkhorn. We and our joint venture partner have not
yet made a production decision on the M Pit project and such decision will
depend, among other things, on securing financing for the $70 million and the
prices of gold, silver, lead and zinc and available smelter terms.
Huizopa
Project
On July
7, 2009, we filed a Canadian National Instrument 43-101 for the Huizopa
project. This 43-101 more fully describes the property and the
drilling results from our 2008 drilling program, but does not contain any
resources or reserves.
METAL
SALES & METAL PRICE AVERAGES
BLACK
FOX
The table
below summarizes metal sales of gold and silver at the Black Fox mine, as well
as other key statistics, for the month ended June 30, 2009:
|
|
One
month
ended
June 30, 2009
|
|
Metal
sales:
|
|
|
|
Gold
(ounces)
|
|
|
5,043 |
|
Total
revenue ($millions)
|
|
$ |
4.7 |
|
Total
cash and production costs:
|
|
|
|
|
Total
cash costs per ounce of gold
|
|
$ |
403 |
|
Total
production costs per ounce of gold
|
|
$ |
649 |
|
MONTANA
TUNNELS
The table
below summarizes our share of metal sales of gold, silver, lead and zinc of the
Montana Tunnels mine, as well as other key statistics, for each period
indicated:
|
|
Three
months ended June 30,
|
|
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metal
sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold
(ounces)
|
|
|
1,260 |
|
|
|
4,612 |
|
|
|
5,125 |
|
|
|
11,545 |
|
Silver
(ounces)
|
|
|
30,626 |
|
|
|
48,012 |
|
|
|
80,275 |
|
|
|
109,595 |
|
Lead
(pounds)
|
|
|
544,134 |
|
|
|
1,243,867 |
|
|
|
1,740,127 |
|
|
|
3,368,561 |
|
Zinc
(pounds)
|
|
|
1,152,566 |
|
|
|
4,648,902 |
|
|
|
5,245,296 |
|
|
|
9,080,699 |
|
Total
revenue ($millions)
|
|
$ |
2.8 |
|
|
$ |
10.0 |
|
|
$ |
10.2 |
|
|
$ |
25.9 |
|
Total
cash and production costs on a by-product basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
cash costs per ounce of gold
|
|
$ |
1,057 |
|
|
$ |
758 |
|
|
$ |
1,178 |
|
|
$ |
301 |
|
Total
production costs per ounce of gold
|
|
$ |
1,191 |
|
|
$ |
829 |
|
|
$ |
1,269 |
|
|
$ |
362 |
|
Total
cash costs on a co-product basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
cash costs per ounce of gold
|
|
$ |
970 |
|
|
$ |
829 |
|
|
$ |
1,055 |
|
|
$ |
673 |
|
Total
cash costs per ounce of silver
|
|
$ |
15.75 |
|
|
$ |
15.76 |
|
|
$ |
16.45 |
|
|
$ |
13.21 |
|
Total
cash costs per pound of lead
|
|
$ |
0.79 |
|
|
$ |
0.79 |
|
|
$ |
0.71 |
|
|
$ |
0.86 |
|
Total
cash costs per pound of zinc
|
|
$ |
0.76 |
|
|
$ |
0.84 |
|
|
$ |
0.66 |
|
|
$ |
0.71 |
|
(1) Montana
Tunnels was placed on care and maintenance on April 30, 2009. The
second quarter statistics above are for the month of April only; the year to
date statistics are for January through April, 2009.
The table
below summarizes average metal prices for each period indicated:
|
|
Three
months ended June 30,
|
|
|
Six
months ended June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
metal prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold
- London bullion mkt. ($/ounce)
|
|
$ |
922 |
|
|
$ |
896 |
|
|
$ |
916 |
|
|
$ |
911 |
|
Silver
- London bullion mkt. ($/ounce)
|
|
$ |
13.76 |
|
|
$ |
17.17 |
|
|
$ |
13.19 |
|
|
$ |
17.43 |
|
Lead
- London Metal Exchange ($/pound)
|
|
$ |
0.68 |
|
|
$ |
1.05 |
|
|
$ |
0.60 |
|
|
$ |
1.18 |
|
Zinc
- London Metal Exchange ($/pound)
|
|
$ |
0.67 |
|
|
$ |
0.96 |
|
|
$ |
0.60 |
|
|
$ |
1.03 |
|
RECONCILIATION
OF CASH OPERATING AND TOTAL PRODUCTION COSTS PER OUNCE
BLACK
FOX
($
in thousands, except per ounce of gold data)
|
|
One
month
ended
June 30, 2009
|
|
Gold
ounces sold
|
|
|
5,043 |
|
Direct
operating costs
|
|
$ |
2,034 |
|
Less: Mining
taxes, royalty expenses
|
|
|
– |
|
By-product credits
|
|
|
– |
|
Cash
operating cost
|
|
|
2,034 |
|
Cash operating cost per ounce of gold
|
|
$ |
403 |
|
Cash
operating costs
|
|
|
2,034 |
|
Add: Mining
taxes, royalty expenses
|
|
|
– |
|
Total
cash costs
|
|
|
2,034 |
|
Total cash cost per ounce of gold
|
|
$ |
403 |
|
Total
cash costs
|
|
|
2,034 |
|
Add: Depreciation
& amortization
|
|
|
1,238 |
|
Total
production costs
|
|
|
3,272 |
|
Total production cost per ounce of gold
|
|
$ |
649 |
|
MONTANA
TUNNELS
|
|
Three
months ended June 30,
|
|
|
Six
months ended June 30,
|
|
($
in thousands, except per ounce of gold data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gold
ounces sold
|
|
|
1,260 |
|
|
|
4,612 |
|
|
|
5,125 |
|
|
|
11,545 |
|
Direct
operating costs
|
|
$ |
3,010 |
|
|
$ |
9,467 |
|
|
$ |
11,413 |
|
|
$ |
18,526 |
|
Less: Mining
taxes, royalty expenses
|
|
|
71 |
|
|
|
297 |
|
|
|
234 |
|
|
|
788 |
|
By-product credits
|
|
|
1,678 |
|
|
|
5,972 |
|
|
|
5,376 |
|
|
|
15,051 |
|
Cash
operating cost
|
|
|
1,261 |
|
|
|
3,198 |
|
|
|
5,803 |
|
|
|
2,687 |
|
Cash operating cost per ounce of gold
|
|
$ |
1,001 |
|
|
$ |
693 |
|
|
$ |
1,132 |
|
|
$ |
233 |
|
Cash
operating costs
|
|
|
1,261 |
|
|
|
3,198 |
|
|
|
5,803 |
|
|
|
2,687 |
|
Add: Mining
taxes, royalty expenses
|
|
|
71 |
|
|
|
297 |
|
|
|
234 |
|
|
|
788 |
|
Total
cash costs
|
|
|
1,332 |
|
|
|
3,495 |
|
|
|
6,037 |
|
|
|
3,475 |
|
Total cash cost per ounce of gold
|
|
$ |
1,057 |
|
|
$ |
758 |
|
|
$ |
1,178 |
|
|
$ |
301 |
|
Total
cash costs
|
|
|
1,332 |
|
|
|
3,495 |
|
|
|
6,037 |
|
|
|
3,475 |
|
Add: Depreciation
& amortization
|
|
|
168 |
|
|
|
327 |
|
|
|
469 |
|
|
|
705 |
|
Total
production costs
|
|
|
1,500 |
|
|
|
3,822 |
|
|
|
6,506 |
|
|
|
4,180 |
|
Total production cost per ounce of gold
|
|
$ |
1,191 |
|
|
$ |
829 |
|
|
$ |
1,269 |
|
|
$ |
362 |
|
MATERIAL
CHANGES IN RESULTS OF OPERATIONS
Three
Months Ended June 30, 2009 Compared to the Three Months Ended June 30,
2008
Revenue
from the Sale of Minerals.
Revenue
for the three months ended June 30, 2009 decreased 25% to $7.6 million from
$10.0 million for the same period in 2008. Decreased revenues are a
result of lower production levels at the Montana Tunnels mine as a result of the
mine being placed on care and maintenance on April 30, 2009, and lower prices of
lead, zinc and silver. The decrease was partly offset by the
commencement of gold production and sales at the Black Fox mine and
mill. Black Fox sales amounted to 5,043 ounces of gold for revenue of
$4.7 million.
Operating
Expenses.
Direct Operating
Costs. Direct operating costs, which include mining costs,
processing costs and smelting and refining charges, for the three months ended
June 30, 2009 decreased 47% to $5.0 million from $9.5 million for the three
months ended June 30, 2008. Direct operating costs at Montana Tunnels
decreased as a direct result of the cessation of mining in December 2008 and
milling in April 2009. Direct operating costs at Black Fox were $2.0
million for the quarter, which was the first quarter that direct operating costs
were incurred as Black Fox commenced production in May 2009.
Depreciation and
Amortization. Depreciation and amortization expenses were $1.4
million and $0.4 million for the three months ended June 30, 2009 and 2008,
respectively. Depreciation expense at Montana Tunnels is lower due to
placing Montana Tunnels on care and maintenance. Depreciation and
amortization at Black Fox was $1.2 million in the second quarter 2009, which was
the first quarter of production for the mine.
General and Administrative
Expenses. General and administrative expenses were $1.1
million and $1.2 million for the three months ended June 30, 2009 and 2008,
respectively.
Accretion Expense – Accrued Site
Closure Costs. Accrued accretion expense was $0.2 million for
the three months ended June 30, 2009 compared to $0.2 million for the same
period in 2008.
Amortization of Deferred
Gain. Amortization of the deferred gain, relating to the
transfer of assets and liabilities to the Montana Tunnels joint venture, was
$0.1 million for the three months ended June 30, 2009 compared to $0.4 million
for the three months ended June 30, 2008. Amortization of the
deferred gain, which was based on production from the Montana Tunnels joint
venture, is now complete.
Exploration and Business Development
Expense. Expenses for exploration and development, consisting
of drilling and related land expenses mainly at our Huizopa project in Mexico,
totaled $0.3 million and $1.0 million for the three months ended June 30, 2009
and 2008, respectively. The lower expenditures in 2009 were a direct
result of lower exploration activity at our Huizopa project.
Total Operating
Expenses. As a result of these expense components, our total
operating expenses decreased 32% to $8.0 million for the three months ended June
30, 2009, from $11.8 million for the three months ended June 30,
2008.
Other
Income (Expenses).
Interest Income and Interest
Expense. We realized de minimis interest income and interest
expense of $1.4 million during the three months ended June 30, 2009 compared to
$0.1 million in interest income and $1.0 million in interest expense during the
three months ended June 30, 2008. Additional interest of $1.1 million
was capitalized for the development of the Black Fox project, which included
$0.5 million of amortization of the debt discount for the Project
Facility. The increase in interest expense is primarily the result of
indebtedness incurred under the Project Facility and the Bridge
Facility.
Realized (Losses) Gains on
Derivative Contracts. Realized losses on derivative contracts
of $0.5 million for the three months ended June 30, 2009 are comprised of (1) a
$0.6 million loss realized for settlement of gold futures contracts of which
5,043 gold ounces were delivered into the forward sales contracts and 4,232 gold
ounces were net settled and (2) realized gains of $0.1 million for the
settlement of Canadian dollar foreign exchange contracts maturing during the
quarter. For the three months ended June 30, 2008, we realized gains
of $1.4 million for the settlement of lead and zinc contracts.
Unrealized (Losses) Gains on
Derivative Contracts. Unrealized gains on derivative contracts
of $3.4 million for the three months ended June 30, 2009 are comprised of (1) an
unrealized loss of $0.6 million for the change in value recorded for gold
forward sales contracts held as of June 30, 2009 and (2) an unrealized gain of
$4.0 million for the change in value of Canadian dollar foreign exchange
contracts held as of June 30, 2009. Both the gold forward sales
contracts and Canadian dollar foreign exchange contracts were entered into on
February 20, 2009 in connection with the Project Facility.
Net
Income (Loss) for the Period.
For the
three months ended June 30, 2009, we recorded net income of $1.3 million, or
$0.01 per share, as compared to a net loss of $1.3 million, or $0.01 per share,
for the three months ended June 30, 2008. The change between periods
is the result of the items discussed above.
Six
Months Ended June 30, 2009 Compared to the Six Months Ended June 30,
2008
Revenue
from the Sale of Minerals.
Revenue
for the six months ended June 30, 2009 decreased 42% to $14.9 million from $25.9
million for the same period in 2008. Decreased production levels at
Montana Tunnels mine, as a result of the mine being placed on care and
maintenance on April 30, 2009, and lower prices of lead, zinc and silver
contributed to the lower revenues in the first six months of 2009 compared to
the same period in 2008. The decrease was partially offset by the
commencement of gold production and sales at Black Fox in the second quarter of
2009.
Operating
Expenses.
Direct Operating
Costs. Direct operating costs, which include mining costs,
processing costs and smelting and refining charges, for the six months ended
June 30, 2009 decreased 27% to $13.4 million from $18.5 million for the six
months ended June 30, 2008. Direct operating costs at Montana Tunnels
decreased as a direct result of the cessation of mining in December 2008 and
milling in April 2009. Direct operating costs at Black Fox were $2.0
million for the first six months of 2009. The Black Fox mine
commenced production in May 2009.
Depreciation and
Amortization. Depreciation and amortization expenses were $1.7
million and $0.8 million for the six months ended June 30, 2009 and 2008,
respectively. Depreciation expense at Montana Tunnels is lower due to
placing Montana Tunnels on care and maintenance. Depreciation and
amortization expenses at Black Fox, which only commenced commercial production
in May 2009, were $1.0 million.
General and Administrative
Expenses. General and administrative expenses were $2.0
million and $2.1 million for the six months ended June 30, 2009 and 2008,
respectively.
Accretion Expense – Accrued Site
Closure Costs. Accrued accretion expense was $0.4 million for
the six months ended June 30, 2009 compared to $0.4 million for the same period
in 2008.
Amortization of Deferred
Gain. Amortization of the deferred gain, relating to the
transfer of assets and liabilities to the Montana Tunnels joint venture, was
$0.6 million for the six months ended June 30, 2009 and $0.9 million for the six
months ended June 30, 2008.
Exploration and Business Development
Expense. Expenses for
exploration and development, consisting of drilling and related land expenses
mainly at our Huizopa project in Mexico, totaled $0.5 million and $1.8 million
for the six months ended June 30, 2009 and 2008, respectively. The
lower expenditures in 2009 were a direct result of lower exploration activity at
our Huizopa project.
Total Operating
Expenses. As a result of these expense components, our total
operating expenses decreased 22% to $17.6 million for the six months ended June
30, 2009, compared to $22.6 million for the six months ended June 30,
2008.
Other
Income (Expenses).
Interest Income and Interest
Expense. We realized interest income of $0.1 million and
interest expense of $2.5 million during the six months ended June 30, 2009
compared to $0.2 million in interest income and $2.2 million in interest expense
during the three months ended June 30, 2008. Additional interest of
$1.8 million was capitalized for the development of the Black Fox project, which
included $0.7 million of amortization of the debt discount for the Project
Facility.
Debt Transaction
Costs. During the six months ended June 30, 2009, we recorded
debt transaction costs of $1.8 million. The $1.8 million costs are
comprised of (1) $0.6 million for legal and other administrative costs
associated with the Project Facility and (2) $1.2 million related to the
issuance of common shares and warrants issued to a financial advisory services
firm for services (See Note 8(c) to the financial statements for further
details).
Loss on Modification of
Debentures. During the six months ended June 30, 2009, we
recorded a loss on modification of debentures of $2.0 million which took place
in the first quarter. The $2.0 million loss is in connection with the
issuance of shares and warrants in connection with the one year extension of
$4.3 million face value Series 2007-A convertible debentures.
Realized (Losses) Gains on
Derivative Contracts. Realized losses on derivative contracts
of $0.1 million for the six months ended June 30, 2009 are comprised of (1) a
$0.6 million loss realized for settlement of gold futures contracts of which
5,043 gold ounces were delivered into the forward sales contracts and 4,232 gold
ounces were net settled, (2) realized gains of $0.1 million for the settlement
of Canadian dollar foreign exchange contracts maturing during the second quarter
and (3) realized gains of $0.4 million for the settlement of gold, silver and
lead contracts that matured in the first quarter. For the six months
ended June 30, 2008, we realized gains of $2.0 million for the settlement of
lead and zinc contracts.
Unrealized (Losses) Gains on
Derivative Contracts. Unrealized losses on derivative
contracts of $15.0 million for the six months ended June 30, 2009 are comprised
of (1) an unrealized loss of $16.7 million for the fair value recorded for gold
forward sales contracts held as of June 30, 2009, (2) an unrealized gain of $2.2
million for the fair value of Canadian dollar foreign exchange contracts held as
of June 30, 2009 and (3) a $0.5 million loss for the change in value recorded
for gold, silver and lead contracts held at the beginning of the year which
matured during the first quarter. Both the gold forward sales
contracts and Canadian dollar foreign exchange contracts were entered into on
February 20, 2009 in connection with the Project Facility.
Net
(Loss) Income.
For the
six months ended June 30, 2009, we recorded a net loss of $23.5 million, or
$0.10 per share, as compared to net income of $2.3 million, or $0.01 per share,
for the six months ended June 30, 2008. The change between periods is
the result of the items discussed above.
MATERIAL
CHANGES IN LIQUIDITY
To date,
we have funded our operations primarily through issuances of debt and equity
securities and cash generated by the Montana Tunnels joint
venture. At June 30, 2009, we had cash of $1.8 million, compared to
cash of $3.1 million at December 31, 2008. The decrease in cash since
December 31, 2008 is primarily the result of investing cash outflows of $44.5
million and operating cash outflows of $1.2 million, partially offset by
financing cash inflows of $44.3 million.
During
the six months ended June 30, 2009, net cash used in investing activities
totaled $44.5 million. Capital expenditures for property, plant and
equipment of $40.5 million were for the development of the Black Fox
project. Cash outflows for restricted cash and certificates of
deposit of $4.1 million were comprised of an inflow of $5.5 million being
released from restricted cash upon meeting certain requirements of our lenders
which were offset by a $9.6 million increase in our environmental bonding posted
for Black Fox reclamation.
During
the six months ended June 30, 2009, cash provided by financing activities was
$44.3 million. Cash inflows of financing activities included
drawdowns of the $70.0 million Project Facility ($70.0 million less the
arrangement fee of $3.5 million) and the exercise of 4.8 million warrants at an
exercise price of $0.176 per common share for proceeds of $0.9
million. These inflows were partially offset by cash outflows for
repayment of debt of $23.0 million which included the repayment of a $15.0
bridge facility.
As at
June 30, 2009, we were in compliance with the various operational covenants of
the Project Facility. During August 2009, a “review event” as defined
by the Project Facility had been communicated to the Banks as a result of Black
Fox producing less than 80% of the agreed gold production for the three-month
period ended July 31, 2009. The occurrence of a review event triggers
the ability of the banks to review the Project Facility and determine if they
wish to continue with the Project Facility. Although the occurrence
of the “review event” triggers the foregoing rights of the Banks under the
Project Facility, the Banks have informed us that they continue to support Black
Fox and we are confident that they will not seek a termination of the Project
Facility as a result of the occurrence of the review event. We are
taking appropriate steps to improve grade control and are engaged in
constructive discussions with the Banks regarding resolving any issues related
to the review event including rescheduling of the quarterly debt repayment
installments, beginning September 30, 2009, to better reflect the expected cash
flows from production at Black Fox.
We
estimate that with our June 30, 2009 cash balance of $1.8 million, the projected
cash flows from Black Fox and the Cdn$13 million financing completed on July 16,
2009, we will have sufficient funds to (1) fund the remainder of the 2009 work
programs for the continued development of Black Fox, (2) fund $0.5 million of
exploration at Huizopa, (3) repay the $15.3 million principal due in 2009 on the
Project Facility and (4) fund corporate overhead.
MATERIAL
CHANGES IN CONTRACTUAL OBLIGATIONS
Not
applicable.
MATERIAL
CHANGES IN OFF BALANCE SHEET ARRANGEMENTS
At June
30, 2009, we had no existing off-balance sheet arrangements, as defined under
SEC rules, that have or are reasonably likely to have a material current or
future effect on our financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.
ACCRUED
RECLAMATION COSTS
As of
June 30, 2009, we have accrued $14.1 million related to reclamation obligations
at our Montana Tunnels and Black Fox properties, an increase of $3.5 million
from December 31, 2008. These liabilities are covered by a
combination of surety bonds, restricted certificates of deposit and property
totaling $21.6 million at June 30, 2009. We have accrued the present
value of management’s estimate of these liabilities as of June 30,
2009.
DIFFERENCES
BETWEEN CANADIAN AND U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
(GAAP)
The
Company reports under Canadian GAAP and reconciles to U.S. GAAP. The
application of U.S. GAAP has a significant effect on the net loss and net loss
per share. For a detailed explanation see Note 18 of our interim
financial statements.
CRITICAL
ACCOUNTING ESTIMATES AND POLICIES
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make a variety of estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements as well as the reported amounts of revenues and expenses during the
reporting periods covered by the financial statements.
For other
critical accounting policies, please refer to those disclosed in our 10-K filing
for the year ended December 31, 2008 and to the changes in accounting policies
described below.
Transition
to United States generally accepted accounting principles
During the year ended December 31,
2008, the Company initiated a plan to transition from accounting principles
generally accepted in Canada (“Canadian GAAP”) to accounting principles
generally accepted in the United States (“US GAAP”), as allowable under both
Canada and US securities laws. The transition is anticipated to be
retroactive and effective for the three years ended December 31, 2009, with
initial presentation of the consolidated financial statements
prepared in accordance with US GAAP to be filed with our Annual Report on Form
10-K for the fiscal year ending December 31, 2009. We have developed
and implemented a US GAAP change-over plan. Towards this end we have
retained qualified professional personnel to oversee and effect the conversion
process. The plan takes into consideration, among other
things:
|
•
|
Changes
in note disclosures;
|
|
•
|
Information
technology and data system
requirements;
|
|
•
|
Disclosure
controls and procedures, including investor relations and external
communications plans related to the US GAAP
conversion;
|
|
•
|
Financial
reporting expertise requirements, including training of personnel;
and
|
|
•
|
Impacts
on other business activities that may be influenced by GAAP measures, such
as performance measures and debt
covenants.
|
Note 18 of the consolidated
financial statements highlights those key areas likely to be impacted by changes
in accounting policy.
CHANGES
IN ACCOUNTING POLICIES
Effective
January 1, 2009, the Company adopted Handbook Section 3064, Goodwill and Intangible
Assets, which replaces Section 3062, and establishes revised standards
for recognition, measurement, presentation and disclosure of goodwill and
intangible assets. Concurrent with the introduction of this standard,
the CICA restricted the application of EIC 27, Revenues and Expenditures in the
Pre-operating Period (“EIC 27”). The adoption of Section 3064
on January 1, 2009, did not have a material impact on the Company’s financial
condition, operating results.
In
January 2009, the CICA issued EIC-173, Credit Risk and the Fair Value of
Financial Assets and Financial Liabilities, which requires the Company to
consider its own credit risk as well as the credit risk of its counterparty when
determining the fair value of financial assets and liabilities, including
derivative instruments. The accounting treatments provided in EIC-173
have been applied in the preparation of these financial statements and as
required have been applied retrospectively without restatement of prior
periods. The adoption of this standard did not have a material impact
on the valuation of financial assets or liabilities.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Our
exposure to market risk includes, but is not limited to, the following risks:
changes in interest rates , changes in foreign currency exchange rates,
commodity price fluctuations and equity price risk.
Interest
Rate Risk
As of
June 30, 2009, the Company had $70.0 million principal outstanding on the
Project Facility. The terms of the Project facility include interest
on the outstanding principal amount accruing at a rate equal to LIBOR plus 7%
per annum and interest being repayable in monthly installments (interest is
currently payable monthly but may be monthly, quarterly or such other period as
may be agreed to by the Banks and us). We estimate that given the
expected outstanding debt during 2009, a one percent change in interest rates
would affect our annual interest expense by $0.5 million. See Note
16(e) to our financial statements above for more information regarding our
interest rate risk.
We
typically invest excess cash in high quality short-term debt
instruments. The rates received on such investments fluctuate with
changes in economic conditions. As a result, our investment income
may fall short of expectations during periods of lower interest
rates. We estimate that given the cash balances expected during 2009,
a one percent change in interest rates would not materially impact our annual
income. We may in the future actively manage our exposure to interest
rate risk.
Foreign
Currency Exchange Rate Risk
While the
majority of our transactions are denominated in U.S. dollars, certain purchases
of labor, operating supplies and capital assets are denominated in Canadian
dollars and Mexican pesos. The appreciation of non-US dollar
currencies against the US dollar increases the costs of goods and services
purchased in non-US dollar, which can adversely impact our net income and cash
flows. Conversely, a depreciation of non-US dollar currencies against
the US dollar usually decreases the costs of goods and services purchased in US
dollar terms. We have entered into the forward purchase of Canadian
dollars at an exchange rate with the US dollar of Cdn$1.21=US$1.0 for Cdn$
equivalent of US$58 million over a four year period commencing April
2009. See Notes 8(b) and 16(d) to our financial statements above for
more information regarding our foreign currency exchange rate risk and how we
manage that risk.
The value
of cash and cash equivalent investments denominated in foreign currencies also
fluctuates with changes in currency exchange rates. Appreciation of
non-US dollar currencies results in a foreign currency gain on such investments
and a decrease in non-US dollar currencies results in a loss.
Commodity
Price Risk
The
profitability of the Company’s operations will be dependent upon the market
price of gold. Gold prices fluctuate widely and are affected by numerous factors
beyond the control of the Company. The level of interest rates, the rate of
inflation, the world supply of gold and the stability of exchange rates can all
cause significant fluctuations in prices. Such external economic factors are in
turn influenced by changes in international investment patterns, monetary
systems and political developments. The price of gold has fluctuated widely in
recent years, and future price declines could cause some projects to become
uneconomic, thereby having a material adverse effect on the Company’s business
and financial condition. We have entered into derivative contracts to
protect the selling price for gold. At June 30, 2009, the remaining
contracts cover 241,303 ounces at an average price of $876 per ounce over the
period through May 2013. See Notes 8(b) and 16(f) to our
financial statements above for more information regarding our commodity price
risk and how we manage that risk. We may in the future more actively
manage our exposure through additional commodity price risk management
programs.
Furthermore,
reserve calculations and life-of-mine plans using significantly lower gold
prices could result in material write-downs of the Company’s investment in
mining properties and increased amortization.
In
addition to adversely affecting the Company's reserve estimates and its
financial condition, declining gold prices could require a reassessment of the
feasibility of a particular project. Such a reassessment may be the result of a
management decision or may be required under financing arrangements related to a
particular project. Even if the project is ultimately determined to be
economically viable, the need to conduct such a reassessment may cause delays in
the implementation of the project.
Equity
Price Risk
We have
in the past and may in the future seek to acquire additional funding by sale of
common shares. Movements in the price of our common shares have been
volatile in the past and may be volatile in the future. As a result,
there is a risk that we may not be able to sell new common shares at an
acceptable price should the need for new equity funding arise.
Disclosure
Controls and Procedures
We
conducted an evaluation of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, or Exchange Act) as of June 30,
2009. This evaluation was conducted under the supervision and with
the participation of management, including our Chief Executive Officer and Chief
Financial Officer. Based upon this evaluation, our Chief Executive
Officer and Chief Financial Officer have concluded that, as of June 30, 2009,
our disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed by us in reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified by the rules and forms of the
SEC. We also concluded that our disclosure controls and procedures
are effective to provide reasonable assurance that information required to be
disclosed in the reports filed or submitted under the Exchange Act is
accumulated and communicated to our management, including our Chief Executive
Officer and Chief Financial Officer, to allow timely decisions regarding
required disclosure.
Changes
in Internal Control
There has
been no change in our internal control over financial reporting during the
quarter ended June 30, 2009, that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting.
None.
Item 1A
of our Annual Report on Form 10-K for the year ended December 31, 2008sets forth
information relating to important risks and uncertainties that could materially
adversely affect our business, financial condition or results of
operations. Those risk factors continue to be relevant to
understanding our business, financial condition and operating results. Those
risk factors have been supplemented in this Quarterly Report on Form 10-Q to
provide updated information, as set forth below.
A
“review event” has occurred under our Black Fox project facility, which could
result in the Banks requiring repayment of all amounts outstanding
thereunder.
Gold
production for the three-month period ended July 31, 2009 was less than 80% of
the amount projected to be produced in the “cash flow model” (as defined in the
Black Fox project facility, which we sometimes refer to herein as the Project
Facility) provided to the Banks under the Project Facility. As a
result, a “review event” (as defined in the Project Facility) was triggered
under the Project Facility and we notified the Banks of such occurrence in July
2009. Under the terms of the Project Facility, the Banks have 30 days
from the date of receipt of such notice to determine if they wish to continue to
provide the Project Facility. If they do not wish to continue to
provide the Project Facility, they must provide notice of such determination and
state a date (which may not be earlier than 90 days from the date of service of
the notice) by which amounts outstanding under the Project Facility must be
repaid and all hedging transactions put in place thereunder must be
unwound. As of August 14, 2009, $70 million principal was outstanding
under the Project Facility. The occurrence of a review event triggers
the ability of the banks to review the Project Facility and determine if they
wish to continue with the Project Facility. Although the occurrence
of the “review event” triggers the foregoing rights of the Banks under the
Project Facility, the Banks have informed us that they continue to support Black
Fox and we are confident that they will not seek a termination of the Project
Facility as a result of the occurrence of the review event. We are
taking appropriate steps to improve grade control and are engaged in
constructive discussions with the Banks regarding resolving any issues related
to the review event, including regarding the possibility of rescheduling the
quarterly repayment installments under the Project Facility, which are currently
scheduled to commence September 30, 2009, to better reflect the expected cash
flows from Black Fox production for the next twelve months.
The risks
described above and in our Annual Report on Form 10-K are not the only risks
facing us. Additional risks and uncertainties not currently known to
us or that we currently deem to be immaterial also may materially adversely
affect our business, financial condition and/or operating results.
None.
None.
The 2009
Annual Meeting of Stockholders of Apollo Gold Corporation was held on
May 7, 2009. The matters voted upon and passed at the meeting
were (i) the election of the directors listed below, (ii) the
ratification of the re-appointment of Deloitte & Touche LLP as the
Corporation’s independent auditors to hold office until the next annual meeting
of shareholders, and (iii) the approval of a resolution to amend the Company’s
stock option plan.
At the
meeting, the slate of directors nominated by management–consisting of Robert W.
Babensee, Marvin K. Kaiser, G. Michael Hobart, R. David Russell, Charles E.
Stott, David W. Peat and W.S. (Steve) Vaughan–was elected. Each
director was elected to serve until the next annual meeting or until his
successor is appointed, unless his office is earlier vacated in accordance with
the Business Corporations Act (Yukon Territory), and the By-laws of the
Corporation.
The board
of directors recommended the re-appointment of Deloitte & Touche LLP,
Chartered Accountants, of Vancouver, British Columbia, the independent auditors
of the Company since 2002, as the auditors of the Corporation to hold office
until the close of the next annual meeting of the shareholders. The
shareholders ratified this appointment.
The board
of directors recommended the approval of the Apollo Gold Corporation Stock
Option Incentive Plan resolution. The shareholders ratified this
resolution.
The
results of the voting on those matters are outlined in the following
table:
|
|
|
|
|
Votes Against/
|
|
Proposal
|
|
|
|
|
|
|
(i) Election
of Management’s Slate of Directors:
|
|
|
|
|
|
|
Charles
E. Stott
|
|
|
102,549,698 |
|
|
|
5,015,213 |
|
R.
David Russell
|
|
|
100,836,825 |
|
|
|
6,728,086 |
|
W.S.
(Steve) Vaughan
|
|
|
94,455,226 |
|
|
|
13,109,685 |
|
G.
Michael Hobart
|
|
|
101,022,098 |
|
|
|
6,562,813 |
|
Robert
W. Babensee
|
|
|
100,995,570 |
|
|
|
6,569,341 |
|
Marvin
K. Kaiser
|
|
|
101,748,835 |
|
|
|
5,816,076 |
|
David
W. Peat
|
|
|
101,068,488 |
|
|
|
6,496,423 |
|
(ii) Ratification
of Deloitte & Touche LLP
|
|
|
99,731,162 |
|
|
|
7,833,751 |
|
(iii) Resolution
for the Approval of the Apollo Gold Corporation Stock Option Plan
Incentive Plan
|
|
|
33,456,508 |
|
|
|
12,566,438 |
|
(1)
|
Based
on the records of the Company’s scrutineer for the meeting, this number
may include votes abstained and/or broker
non-votes.
|
None.
Exhibit No.
|
|
Title of Exhibit
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
|
32.1
|
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley
Act
|
SIGNATURES
In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
|
|
APOLLO
GOLD CORPORATION
|
|
|
|
Date:
August 14, 2009
|
|
/s/ R. David
Russell
|
|
|
R.
David Russell, President and
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
Date:
August 14, 2009
|
|
/s/ Melvyn
Williams
|
|
|
Melvyn
Williams,
|
|
|
Chief
Financial Officer and Senior Vice President Finance and Corporate
Development
|
Exhibit No.
|
|
Title of Exhibit
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act
|
32.1
|
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley
Act
|