An arrow towards production from Apollo

Apollo Gold (APG-T, AGT-X) is getting ready to take high grade ore out of the ground near Timmins.

Unlike many other juniors with dreams of turning prospective ground into a mine, Apollo already has mining experience and the cashflows that come with it, from its Montana Tunnels Mine — a 50% joint venture with Elkhorn Tunnels .

But the apple in the eye of Apollo executives is Black Fox. A project in the advanced development stage with a probable reserve of 1.3 million oz. of gold.

The plan is to mine ore at Black Fox via both open pit and underground methods, and when broken down in those terms, the reserve slices into 4.4 million tonnes grading 5.2 grams gold for 730,000 oz. for the planned open pit, and 2.1 million tonnes grading 8.8 grams gold for 600,000 oz for the planned underground operation.

But good grades in the ground are only half of the story as every serious mining investor knows.

So to turn ore into product Apollo is buying a mill from St Andrew Goldfields’ (SAS-T) who happens to be a neighbour and a significant investor in Apollo.

In late March, Apollo announced a plan to buy St. Andrew Goldfield’s Stock Mine property a property that comes with a mill, a laboratory and tailings facilities, for the rightly sum of US$20 million.

Stock Mill was still turning for St Andrew as recently as May of last year, so Apollo won’t have to worry about cleaning off too many cobwebs. Nor will it have to worry about adapting the mill to its rock Stock Mill processed ore from the Glimmer mine which was situated at the current location of the Black Fox deposit.

For Apollo’s part, it says once the deal for the mill is finalized it will be able to start using it as early as 2009.

The only negative is that the logistics of working out the deal have pushed back the finishing off of feasibility at Black Fox though only slightly. Apollo now says feasibility will be done on April 14 compared with its target of March 31.

Apollo expects permitting for the project to be finished by the middle of the year.

When and if it secures those permits, it will represent yet another step in the right direction for the junior producer.

It recently announced financial results from the fourth quarter of last year and they showed a marked improvement over the year previous.

Apollo reported net income of US$2.5 million compared to a net loss of US$3.4 million for the same period the year before.

Net income for the entire year was slightly less at US$2.4 million but much improved over the loss of US$15.6 million for 2006.

The dismal numbers in 2006 were due to the suspension of mining at its Montana Tunnel project that were the direct product of a pit wall failure. The open pit, however, was remediated in February of last year and mill operations resumed at the beginning of March. It had been out of commission since May of 2006.

While the mine was only operating for 10 months in 2007, Apollo’s take from the mine came in at roughly 17,000 oz. of gold, 251,000 oz. of silver, 5.6 million lbs of lead and 11.9 million lbs of zinc.

Including by-product credits, gold costs came in at negative $60 per oz. of gold broken down as US$456 per oz. gold, US$9.02 per oz. silver, 83 per lb. lead and 85 per lb zinc.

Cash flow from operating activities for 2007 came in at US$7.5 million with the main source being Montana Tunnels.

Cash from financing activities totalled US$12.3 million mainly from issuing debt and equity. Those cash inflows were offset by US$19.3 million worth of cash outflows into investing activities.

Of that US$19.3 million, $8.3 million went towards capital expenditures with US$5.1 million going towards developing Black Fox project, $2 million towards upping its investment in Huizopa property and US$1.2 million for Montana Tunnels.

Montana Tunnels is slated to mine 600,000 tonnes of waste material and 6.2 million tonnes of ore for a total of 6.8 million tonnes this year.

In all, Apollo says the mill should turn out 45,000 oz. of gold, 350,000 oz. of silver, 14 million lbs of lead and 35 million lbs of zinc. Apollo’s take will be half of that output with its share of expenditures for the amount likely coming in at around US$600,000.

Apollo also owns the Huizopa project — an early stage exploration project in the Sierra Madres in Chihuahua, Mexico. A drilling program got under way there in February of this year and while Apollo has had to use a helicopter for this first phase of drilling, a dirt road is being built for better access for the second phase.

Total cost for the first program composed of 30 to 40 holes and the road are estimated at US$2.5 million.