Filed
pursuant to Rule 424(b)(3)
Registration
File No. 333-131876
PROSPECTUS
APOLLO
GOLD CORPORATION
23,650,000
Common Shares
The
selling shareholder identified on page 16 may use this prospectus to offer
and resell from time to time up to 21,650,000 of the issued and outstanding
common shares of Apollo Gold Corporation (together with its subsidiaries,
“Apollo,” “we” or “us”) and 2,000,000 common shares of Apollo issuable upon
exercise of share purchase warrants, comprised of (i) 10,000,000 common shares
acquired by the selling shareholder in a private placement completed on June
3,
2005, (ii) 11,650,000 common shares and 2,000,000 common shares issuable upon
exercise of share purchase warrants acquired by the selling shareholder in
a
private placement completed on January 26, 2006. Each share purchase warrant
is
exercisable at Cdn$0.39 for one common share of Apollo and expires on January
26, 2008. We will not receive any proceeds from the sale of the shares resold
under this prospectus by the selling shareholder.
Our
common shares are traded on the American Stock Exchange under the symbol “AGT”
and on the Toronto Stock Exchange under the symbol “APG.” On February 13, 2006,
the cluary 13, 2006,
the closing price for our common shares on the American Stock Exchange was
$0.43 per share and the closing price on the Toronto Stock Exchange was
Cdn$0.49 per share.
The
selling shareholder may sell the shares in transactions on the American Stock
Exchange or the Toronto Stock Exchange and by any other method permitted by
applicable law. The selling shareholder may sell the shares at prevailing market
prices or at prices negotiated with purchasers and will be responsible for
any
commissions or discounts due to brokers or dealers. The amount of these
commissions or discounts cannot be known at this time because they will be
negotiated at the time of the sales. We will pay certain of the other offering
expenses of the selling shareholder. See “Plan of Distribution” beginning on
page 17.
References
in this prospectus to “$” are to United States dollars. Canadian dollars are
indicated by the symbol “Cdn$”.
The
securities offered in this prospectus involve a high degree of risk. You should
carefully consider the matters set forth in “Risk Factors” beginning on
page 4 of this prospectus in determining whether to purchase our
securities.
Neither
the U.S. Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The
date
of this prospectus is May 5, 2006.
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WHERE
YOU CAN FIND MORE INFORMATION
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INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
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STATEMENTS
REGARDING FORWARD-LOOKING INFORMATION
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OUR
BUSINESS
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4
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RISK
FACTORS
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USE
OF PROCEEDS
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DESCRIPTION
OF COMMON SHARES
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DESCRIPTION
OF WARRANTS
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TAX
CONSIDERATIONS
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SELLING
SHAREHOLDER
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PLAN
OF DISTRIBUTION
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EXPERTS
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You
should rely only on information contained or incorporated by reference in this
prospectus. We have not authorized anyone to provide you with information
different from that contained or incorporated in this prospectus.
You
should not assume that the information contained or incorporated by reference
in
this prospectus is accurate as of any date other than the date on the front
of
this prospectus or the dates of the documents incorporated by reference.
WHERE
YOU CAN FIND MORE INFORMATION
We
are
subject to the reporting requirements of the Securities Exchange Act of 1934,
as
amended (the “Exchange Act”), and file annual, quarterly and periodic reports,
proxy statements and other information with the United States Securities and
Exchange Commission (the “SEC”). The SEC maintains a web site
(http://www.sec.gov) on which our reports, proxy statements and other
information are made available. Such reports, proxy statements and other
information may also be inspected and copied at the public reference facilities
maintained by the SEC at 100 F Street, NE, Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the operation
of the public reference facilities.
We
have
filed with the SEC a Registration Statement on Form S-3, under the
Securities Act of 1933, as amended (the “Securities Act”), with respect to the
securities offered by this prospectus. This prospectus, which constitutes part
of the Registration Statement, does not contain all of the information set
forth
in the Registration Statement, certain parts of which have been omitted in
accordance with the rules and regulations of the SEC. Reference is hereby made
to the Registration Statement and the exhibits to the Registration Statement
for
further information with respect to us and the securities.
The
SEC
allows us to “incorporate by reference” our publicly filed reports into this
prospectus, which means that information included in those reports is considered
part of this prospectus. Information that we file with the SEC after the date
of
this prospectus will automatically update and supersede the information
contained in this prospectus and in prior reports. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until all of the
securities offered pursuant to this prospectus have been sold:
1. Our
Annual Report on Form 10-K for the year ended December 31, 2004, filed
with the SEC on March 16, 2005, and our Amendment No. 1 to that Annual
Report on Form 10-K/A filed with the SEC on January 25, 2006;
2. Our
Quarterly Reports on Form 10-Q for the quarters ended (i) March 31,
2005, filed with the SEC on May 11, 2005; (ii) June 30, 2005, filed
with the SEC on August 9, 2005; and (iii) September 30, 2005, filed
with the SEC on November 9, 2005;
3. Our
Current Reports on Form 8-K, filed with the SEC on January 6, 2005; January
13, 2005; January 25, 2005; May 24, 2005; June 7, 2005;
October 21, 2005; October 27, 2005; October 28, 2005;
November 23, 2005; December 22, 2005; January 13,
2006; January 26, 2006; January 27, 2006; and January 31, 2006;
and
4. The
description of our capital stock set forth in our Registration Statement on
Form 10, filed June 23, 2003.
We
will
furnish without charge to you, on written or oral request, a copy of any or
all
of the above documents, other than exhibits to such documents which are not
specifically incorporated by reference therein. You should direct any requests
for documents to the Chief Financial Officer, Apollo Gold Corporation,
5655 S. Yosemite Street, Suite 200, Greenwood Village, Colorado
80111-3220, telephone (720) 886-9656.
The
information relating to us contained in this prospectus is not comprehensive
and
should be read together with the information contained in the incorporated
documents. Descriptions contained in the incorporated documents as to the
contents of any contract or other document may not contain all of the
information which is of interest to you. You should refer to the copy of such
contract or other document filed as an exhibit to our filings.
STATEMENTS
REGARDING FORWARD-LOOKING INFORMATION
This
prospectus and the documents incorporated by reference in this prospectus
contain forward-looking statements, within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act. Words such as
“anticipates,” “expects,” “intends,” “forecasts,” “plans,” “believes,” “seeks,”
“estimates,” “may,” “will,” and similar expressions identify forward-looking
statements. These statements include comments regarding: the establishment
and
estimates of mineral reserves and resources, production, production commencement
dates, production costs, cash operating costs, total cash costs, grade,
processing capacity, potential mine life, feasibility studies, development
costs, expenditures and exploration.
Although
we believe that our plans, intentions and expectations reflected in these
forward-looking statements are reasonable, we cannot be certain that these
plans, intentions or expectations will be achieved. Our actual results could
differ materially from those anticipated in these forward-looking statements
as
a result of the risk factors set forth below and other factors described in
more
detail in this prospectus:
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the
establishment and estimates of mineral reserves and
resources;
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production
commencement dates;
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impact
of governmental laws;
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nonpayment
of dividends and use of earnings from
operations;
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our
ability to fund our capital
requirements;
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factors
impacting our results of operations;
and
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the
impact of adoption of new accounting
standards.
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Although
we believe that our plans, intentions and expectations reflected in these
forward-looking statements are reasonable, we cannot be certain that these
plans, intentions or expectations will be achieved.
Our
actual results could differ materially from those anticipated in these
forward-looking statements as a result of the risk factors set forth below
and
other factors described in more detail in this prospectus:
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unexpected
changes in business and economic
conditions;
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significant
increases or decreases in gold
prices;
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changes
in interest and currency exchange
rates;
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timing
and amount of production;
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unanticipated
grade changes;
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unanticipated
recovery or production problems;
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changes
in mining and milling costs;
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pit
slides at our mining property;
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metallurgy,
processing, access, availability of materials, equipment, supplies
and
water;
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determination
of reserves;
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changes
in project parameters;
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costs
and timing of development of new
reserves;
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results
of current and future exploration
activities;
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results
of pending and future feasibility
studies;
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joint
venture relationships;
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political
or economic instability, either globally or in the countries in which
we
operate;
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local
and community impacts and issues;
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timing
of receipt of government approvals;
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accidents
and labor disputes;
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environmental
costs and risks;
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competitive
factors, including competition for property
acquisitions;
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availability
of external financing at reasonable rates or at
all; and
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the
factors discussed in this prospectus under the heading “Risk
Factors.”
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Many
of
these factors are beyond our ability to control or predict. These factors are
not intended to represent a complete list of the general or specific factors
that may affect us. We may note additional factors elsewhere in this prospectus
and in any documents incorporated by reference into this prospectus. We
undertake no obligation to update forward-looking statements.
The
earliest predecessor to Apollo Gold Corporation was incorporated under the
laws
of the Province of Ontario in 1936. In May 2003, it reincorporated under the
laws of the Yukon Territory. Apollo Gold Corporation maintains its registered
office at 204 Black Street, Suite 300, Whitehorse, Yukon Territory, Canada
Y1A 2M9, and the telephone number at that office is (867) 668-5252. Apollo
Gold Corporation maintains its principal executive office at
5655 S. Yosemite Street, Suite 200, Greenwood Village, Colorado
80111-3220, and the telephone number at that office is (720) 886-9656. Our
internet address is http://www.apollogold.com. Information contained on our
website is not a part of this prospectus.
Apollo
is
engaged in gold mining including extraction, processing, refining and the
production of other by-product metals, as well as related activities including
exploration and development. The Company owns and operates the Montana Tunnels
Mine, an open pit mine and mill currently producing gold dore and lead-gold
and
zinc-gold concentrates from stockpiled, low grade ore.
Apollo
has a development property, the Black Fox Project, which is located near the
Township of Matheson in the Province of Ontario, Canada. Apollo also owns
Mexican subsidiaries which own or have the right to acquire concessions at
the
Huizopa exploration project, located in the Sierra Madre gold belt in Chihuahua,
Mexico.
An
investment in the securities involves a high degree of risk. You should consider
the following discussion of risks in addition to the other information in this
prospectus before purchasing any of the securities. In addition to historical
information, the information in this prospectus contains “forward-looking”
statements about our future business and performance. Our actual operating
results and financial performance may be very different from what we expect
as
of the date of this prospectus. The risks below address some of the factors
that
may affect our future operating results and financial performance.
We
have identified a material weakness in our internal controls over financial
reporting.
We
identified material weaknesses for the year ended December 31, 2004 in two
areas. A material weakness is a significant deficiency, or combination of
significant deficiencies, that results in more than a remote likelihood that
a
material misstatement of the annual or interim financial statements will not
be
prevented or detected. First, we had deficient inventory control and management
processes and lack of segregation of procurement and accounting duties at our
Florida Canyon Mine, primarily due to a lack of sufficient personnel at the
Florida Canyon Mine. As a result of the sale of the Florida Canyon Mine on
November 18, 2005, it is categorized as a discontinued operation. Second,
we lacked appropriate review of non-routine or complex accounting matters,
related accounting entries, and appropriate documentation, disclosure and
application of Canadian and U.S. generally accepted accounting principles
(“GAAP”), primarily due to a lack of sufficient personnel with a level of
technical accounting expertise commensurate with our reporting requirements.
Through
the third quarter of 2005 we established a Financial Disclosure Policy Committee
to review all non-routine accounting matters and disclosure and application
of
Canadian and U.S. GAAP, added additional technical accounting expertise to
the accounting staff, and implemented formal policies addressing the internal
controls over non-routine or complex accounting matters, accounting entries,
appropriate documentation and disclosures. We continued our evaluation of these
controls and procedures in the fourth quarter 2005 and have continued monitoring
these controls and procedures through January 2006 to determine if these
controls are operating effectively. We have not yet been able to test and assess
the operating effectiveness of these mitigating steps surrounding the financial
reporting process, and testing may reveal similar or additional weaknesses
in
the design and effectiveness related to the financial reporting process.
The
market price of our common shares could experience volatility and could continue
to decline significantly.
Our
common shares are listed on the American Stock Exchange and the Toronto Stock
Exchange. Our share price has declined significantly over the past year.
Securities of small-cap companies have experienced substantial volatility in
the
past, often based on factors unrelated to the financial performance or prospects
of the companies involved. These factors include macroeconomic developments
in
North America and globally and market perceptions of the attractiveness of
particular industries. Our share price is also likely to be significantly
affected by short-term changes in gold prices or in our financial condition
or
results of operations as reflected in our quarterly earnings reports. As a
result of any of these factors, the market price of our common shares at any
given point in time might not accurately reflect our long-term value. Securities
class action litigation often has been brought against companies following
periods of volatility in the market price of their securities. We could in
the
future be the target of similar litigation. Securities litigation could result
in substantial costs and damages and divert management’s attention and
resources.
If
we complete additional equity financings, then our existing shareholders may
experience dilution.
Any
additional equity financing that we obtain would involve the sale of our common
shares and/or sales of securities that are convertible or exercisable into
our
common shares, such as share purchase warrants or convertible notes. There
is no
assurance that we will be able to complete equity financings that are not
dilutive to our existing shareholders.
The
existence of outstanding rights to purchase common shares may impair our ability
to raise capital.
As
of
January 27, 2006, approximately 30 million additional common shares are
issuable on exercise of warrants, options or other rights to purchase common
shares at prices ranging from $0.20 to $2.34. In addition, there are
approximately 11.7 million common shares issuable upon the conversion of the
$8,731,000 outstanding principal amount of our Series B Convertible Debentures
at the option of the holder at a conversion price of $0.75 per share. During
the
term of the warrants, options and other rights, the holders are given an
opportunity to profit from a rise in the market price of our common shares
with
a resulting dilution in the interest of the other shareholders. Our ability
to
obtain additional financing during the period such rights are outstanding may
be
adversely affected, and the existence of the rights may have an adverse effect
on the price of our common shares. The holders of the warrants, options and
other rights can be expected to exercise them at a time when we would, in all
likelihood, be able to obtain any needed capital by a new offering of securities
on terms more favorable than those provided by the outstanding rights.
There
may be certain tax risks associated with investments in our company.
Potential
investors that are United States taxpayers should consider that we could be
considered to be a “passive foreign investment company” (“PFIC”) for federal
income tax purposes. Although we believe that we currently are not a PFIC and
do
not expect to become a PFIC in the near future, the tests for determining PFIC
status are dependent upon a number of factors, some of which are beyond our
control, and we can not assure you that we will not become a PFIC in the future.
If we were deemed to be a PFIC, then a United States taxpayer who disposes
or is
deemed to dispose of our shares at a gain, or who received a so-called “excess
distribution” on the shares, generally would be required to treat such gain or
excess distribution as ordinary income and pay an interest charge on a portion
of the gain or distribution. Certain elections may sometimes be used to reduce
the adverse impact of the PFIC rules for holders of ordinary shares (so-called
“QEF” elections and “mark-to-market” elections), but these elections may
accelerate the recognition of income and they result in the recognition of
ordinary income. Special estate tax rules could be applicable to our shares
if
we are classified as a PFIC for income tax purposes.
We
have a history of losses and we expect to incur losses in the future.
Since
our
inception through a merger in June 2002, we have incurred significant losses
and
we expect significant losses to continue for the foreseeable future. Our net
losses were $31,007,000, $14,090,000 and $15,180,000 for the years ended
December 31, 2004, 2003 and 2002, respectively. Our net losses for the nine
months ended September 30, 2005 are $17,960,000. There can be no assurance
that we will achieve or sustain profitability in the future.
We
have a limited operating history on which to evaluate our potential for future
success.
We
were
formed as a result of a merger in June 2002 and have only a limited operating
history upon which you can evaluate our business and prospects. During this
period, we have not generated sufficient revenues to cover our expenses and
costs. If we are unsuccessful in addressing these risks and uncertainties,
our
business, results of operations and financial condition will be materially
and
adversely affected.
We
are dependent on certain key personnel.
We
are
currently dependent upon the ability and experience of R. David Russell, our
President and Chief Executive Officer; Richard F. Nanna, our Senior Vice
President-Exploration; and Melvyn Williams, our Senior Vice President-Finance
and Corporate Development and Chief Financial Officer. We believe that our
success depends on the continued service of our key officers and there can
be no
assurance that we will be able to retain any or all of these officers. We
currently do not carry key person insurance on any of these individuals, and
the
loss of one or more of them could have a material adverse effect on our
operations.
Our
earnings may be affected by metals price volatility, specifically the volatility
of gold and zinc prices.
We
derive
all of our revenues from the sale of gold, silver, lead and zinc and, as a
result, our earnings are directly related to the prices of these metals. Changes
in the price of gold significantly affect our profitability. Gold prices
historically have fluctuated widely, based on numerous industry factors
including:
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industrial
and jewelry demand;
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central
bank lending, sales and purchases of
gold;
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forward
sales of gold by producers and
speculators;
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production
and cost levels in major gold-producing
regions; and
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rapid
short-term changes in supply and demand because of speculative or
hedging
activities.
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Gold
prices are also affected by macroeconomic factors, including:
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confidence
in the global monetary system;
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expectations
of the future rate of inflation (if
any);
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the
strength of, and confidence in, the U.S. dollar (the currency in
which the price of gold is generally quoted) and other
currencies;
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global
or regional political or economic events, including but not limited
to
acts of terrorism.
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The
current demand for, and supply of, gold also affects gold prices. The supply
of
gold consists of a combination of new production from mining and existing shares
of bullion held by government central banks, public and private financial
institutions, industrial organizations and private individuals. As the amounts
produced by all producers in any single year constitute a small portion of
the
total potential supply of gold, normal variations in current production do
not
usually have a significant impact on the supply of gold or on its price.
Mobilization of gold held by central banks through lending and official sales
may have a significant adverse impact on the gold price.
The
market prices for silver, zinc and lead are also volatile and are affected
by
numerous factors beyond our control, including global or regional consumptive
patterns, speculative activities, and general global political and economic
conditions. Our Montana Tunnels Mine has historically produced approximately
45 million pounds of these metals annually, and therefore the market prices
of these metals have a significant effect on our financial condition and results
of operations.
All
of
the above factors are beyond our control and are impossible for us to predict.
If the market prices for gold, silver, zinc or lead fall below our costs to
produce them for a sustained period of time, we will experience additional
losses and we could also be required by our reduced revenue to discontinue
exploration, development and/or mining at one or more of our properties.
Our
reserve estimates are potentially inaccurate.
We
estimate our reserves on our properties as either “proven reserves” or “probable
reserves.” Our ore reserve figures and costs are primarily estimates and are not
guarantees that we will recover the indicated quantities of these metals. We
estimate proven reserve quantities based on sampling and testing of sites
conducted by us and by independent companies hired by us. Probable reserves
are
based on information similar to that used for proven reserves, but the sites
for
sampling are less extensive, and the degree of certainty is less. Reserve
estimation is an interpretive process based upon available geological data
and
statistical inferences and is inherently imprecise and may prove to be
unreliable.
Our
reserves are reduced as existing reserves are depleted through production.
Reserves may be reduced due to lower than anticipated volume and grade of
reserves mined and processed and recovery rates.
Reserve
estimates are calculated using assumptions regarding metals prices. These prices
have fluctuated widely in the past. Declines in the market price of metals,
as
well as increased production costs, capital costs and reduced recovery rates,
may render reserves uneconomic to exploit. Any material reduction in our
reserves may lead to increased net losses, reduced cash flow, asset write-downs
and other adverse effects on our results of operations and financial condition.
Reserves should not be interpreted as assurances of mine life or of the
profitability of current or future operations. No assurance can be given that
the amount of metal estimated will be produced or the indicated level of
recovery of these metals will be realized.
We
may not achieve our production estimates.
In
the
past, we have prepared estimates of future production for our operations. We
developed our estimates based on, among other things, mining experience, reserve
estimates, assumptions regarding ground conditions and physical characteristics
of ores (such as hardness and presence or absence of certain metallurgical
characteristics) and estimated rates and costs of mining and processing. In
the
past, our actual production from time to time has been lower than our production
estimates and this may be the case in the future.
Each
of
these factors also applies to future development properties and to any future
recommencement of mining at Montana Tunnels. In the case of mines we may develop
in the future, we do not have the benefit of actual experience in our estimates,
and there is a greater likelihood that the actual results will vary from the
estimates. In addition, development projects are subject to unexpected
construction and start-up problems and delays.
Our
future profitability depends in part on actual economic returns and actual
costs
of developing mines, which may differ significantly from our estimates and
involve unexpected problems, costs and delays.
From
time
to time we expect to engage in the development of new ore bodies. Our ability
to
sustain or increase our present level of production is dependent in part on
the
successful exploration and development of new ore bodies and/or expansion of
existing mining operations. Decisions about the development of Black Fox and
other future projects are subject to the successful completion of feasibility
studies, issuance of necessary governmental permits and receipt of adequate
financing.
Development
projects have no operating history upon which to base estimates of future cash
flow. Our estimates of proven and probable ore reserves and cash operating
costs
are, to a large extent, based upon detailed geologic and engineering analysis.
We also conduct feasibility studies that derive estimates of capital and
operating costs based upon many factors.
It
is
possible that actual costs and economic returns may differ materially from
our
best estimates. It is not unusual in the mining industry for new mining
operations to experience unexpected problems during the start-up phase and
to
require more capital than anticipated. There can be no assurance that the
development of the Black Fox property will be profitable.
Exploration
in general, and gold exploration in particular, are speculative and are
frequently unsuccessful.
Mineral
exploration, particularly for gold and silver, is highly speculative in nature,
capital intensive, involves many risks and frequently is nonproductive. There
can be no assurance that our mineral exploration efforts will be successful.
If
we discover a site with gold or other mineralization, it will take a number
of
years from the initial phases of drilling until production is possible, during
which time the economic feasibility of production may change. Substantial
expenditures are required to establish ore reserves through drilling, to
determine metallurgical processes to extract the metals from the ore and, in
the
case of new properties, to construct mining and processing facilities. As a
result of these uncertainties, no assurance can be given that our exploration
programs will result in the expansion or replacement of existing ore reserves
that are being depleted by current production.
We
are dependent upon one mining property.
All
of
our revenues are currently derived from our milling operations at the Montana
Tunnels Mine, which is a low-grade mine. Historically the Montana Tunnels Mine
has been unprofitable, and we expect it will continue to be unprofitable without
additional investment. During 2004 we experienced problems related to the
milling of low-grade ore at the Montana Tunnels Mine, which negatively affected
our revenues and earnings. We suspended mining at Montana Tunnels on
October 21, 2005, due to pit wall activity, and expect to continue to mill
ore from low grade stockpiles through the first quarter of 2006. Current studies
indicate capital ranging from $6 to 12 million would be required to
recommence mining at Montana Tunnels. At this time, we are unable to assess
whether we will be able to identify additional low grade stockpiled ore for
processing or to obtain adequate funding in order to recommence
mining.
We
do not currently have and may not be able to raise the funds necessary to
explore and develop our Black Fox and Huizopa properties and our other
properties.
We
do not
currently have sufficient funds to develop a mine at Black Fox or to complete
all of our planned exploration activities at Huizopa. The development of Black
Fox and exploration of Huizopa will require significant capital expenditures.
Sources of external financing may include bank and nonbank borrowings and future
debt and equity offerings. There can be no assurance that financing will be
available on acceptable terms, or at all. The failure to obtain financing would
have a material adverse effect on our growth strategy and our results of
operations and financial condition.
Our
Black Fox property is pledged to the holders of our 12% Series 2004-B
Secured Convertible Debentures and we may not be able to obtain financing from
an asset based lender.
Our
Black
Fox property is pledged to the holders of our 12% Series 2004-B Secured
Convertible Debentures as security for our obligations under these debentures.
It may be difficult for us to raise additional external funds through banks,
asset based lenders, or other types of lenders, which may require us to raise
additional funds through future debt and equity offerings. In addition, the
inability to pledge any additional significant assets may make it difficult
or
impossible to obtain financing on acceptable terms, or at all. The failure
to
obtain acceptable financing would have a material adverse effect on our growth
strategy and our results of operations and financial condition.
Possible
hedging activities could expose us to losses.
In
the
future, we may enter into precious and/or base metals hedging contracts that
may
involve outright forward sales contracts, spot-deferred sales contracts, the
use
of options which may involve the sale of call options and the purchase of all
these hedging instruments. There can be no assurance that we will be able to
successfully hedge against price, currency and interest rate fluctuations.
In
addition, our ability to hedge against zinc and lead price risk in a timely
manner may be adversely affected by the smaller volume of transactions in both
the zinc and lead markets. Further, there can be no assurance that the use
of
hedging techniques will always be to our benefit. Some hedging instruments
may
prevent us from realizing the benefit from subsequent increases in market prices
with respect to covered production. This limitation would limit our revenues
and
profits. Hedging contracts are also subject to the risk that the other party
may
be unable or unwilling to perform its obligations under these contracts. Any
significant nonperformance could have a material adverse effect on our financial
condition and results of operations.
We
face substantial governmental regulation.
Safety.
Our
U.S. mining operations are subject to inspection and regulation by the Mine
Safety and Health Administration of the United States Department of Labor
(“MSHA”) under the provisions of the Mine Safety and Health Act of 1977. The
Occupational Safety and Health Administration (“OSHA”) also has jurisdiction
over safety and health standards not covered by MSHA. Our policy is to comply
with applicable directives and regulations of MSHA and OSHA. We have made and
expect to make in the future, significant expenditures to comply with these
laws
and regulations.
Current
Environmental Laws and Regulations.
We must
comply with environmental standards, laws and regulations that may result in
increased costs and delays depending on the nature of the regulated activity
and
how stringently the regulations are implemented by the regulatory authority.
The
costs and delays associated with compliance with such laws and regulations
could
stop us from proceeding with the exploration of a project or the operation
or
future exploration of a mine. Laws and regulations involving the protection
and
remediation of the environment and the governmental policies for implementation
of such laws and regulations are constantly changing and are generally becoming
more restrictive. We have made, and expect to make in the future, significant
expenditures to comply with such laws and regulations.
Some
of
our properties are located in historic mining districts with past production
and
abandoned mines. The major historical mine workings and processing facilities
owned (wholly or partially) by us in Montana are being targeted by the Montana
Department of Environmental Quality (“MDEQ”) for publicly funded cleanup, which
reduces our exposure to financial liability. We are participating with the
MDEQ
under Voluntary Cleanup Plans on those sites. Our cleanup responsibilities
have
been completed at the Corbin Flats Facility and at the Gregory Mine site, both
located in Jefferson County, Montana, under programs involving cooperative
efforts with the MDEQ. MDEQ is also contemplating remediation of the Washington
Mine site at public expense under the Surface Mining Control and Reclamation
Act
of 1977 (“SMCRA”). In February 2004, we consented to MDEQ’s entry onto the
portion of the Washington Mine site owned by us to undertake publicly funded
remediation under SMCRA. In March 2004, we entered into a definitive written
settlement agreement with MDEQ and the Bureau of Land Management (“BLM”) under
which MDEQ will conduct publicly funded remediation of the Wickes Smelter site
under SMCRA and will grant us a site release in exchange for our donation of
the
portion of the site owned by us to BLM for use as a waste repository. However,
there can be no assurance that we will continue to resolve disputed liability
for historical mine and ore processing facility waste sites on such favorable
terms in the future. We remain exposed to liability, or assertions of liability,
that would require expenditure of legal defense costs, under joint and several
liability statutes for cleanups of historical wastes that have not yet been
completed.
Environmental
laws and regulations may also have an indirect impact on us, such as increased
costs for electricity due to acid rain provisions of the Clean Air Act
Amendments of 1990. Charges by refiners to which we sell our metallic
concentrates and products have substantially increased over the past several
years because of requirements that refiners meet revised environmental quality
standards. We have no control over the refiners’ operations or their compliance
with environmental laws and regulations.
Potential
Legislation.
Changes
to the current laws and regulations governing the operations and activities
of
mining companies, including changes to the U.S. General Mining Law of 1872,
and permitting, environmental, title, health and safety, labor and tax laws,
are
actively considered from time to time. We cannot predict which changes may
be
considered or adopted and changes in these laws and regulations could have
a
material adverse impact on our business. Expenses associated with the compliance
with new laws or regulations could be material. Further, increased expenses
could prevent or delay exploration or mine development projects and could
therefore affect future levels of mineral production.
We
are subject to environmental risks.
Environmental
Liability.
We are
subject to potential risks and liabilities associated with environmental
compliance and the disposal of waste rock and materials that could occur as
a
result of our mineral exploration and production. To the extent that we are
subject to environmental liabilities, the payment of such liabilities or the
costs that we may incur to remedy any non-compliance with environmental laws
would reduce funds otherwise available to us and could have a material adverse
effect on our financial condition or results of operations. If we are unable
to
fully remedy an environmental problem, we might be required to suspend
operations or enter into interim compliance measures pending completion of
the
required remedy. The potential exposure may be significant and could have a
material adverse effect on us. We have not purchased insurance for environmental
risks (including potential liability for pollution or other hazards as a result
of the disposal of waste products occurring from exploration and production)
because it is not generally available at a reasonable price or at all.
Environmental
Permits.
All of
our exploration, development and production activities are subject to regulation
under one or more of the various state, federal and provincial environmental
laws and regulations in Canada, Mexico and the U.S. Many of the regulations
require us to obtain permits for our activities. We must update and review
our
permits from time to time, and are subject to environmental impact analyses
and
public review processes prior to approval of the additional activities. It
is
possible that future changes in applicable laws, regulations and permits or
changes in their enforcement or regulatory interpretation could have a
significant impact on some portion of our business, causing those activities
to
be economically reevaluated at that time. Those risks include, but are not
limited to, the risk that regulatory authorities may increase bonding
requirements beyond our financial capabilities. The posting of bonding in
accordance with regulatory determinations is a condition to the right to operate
under all material operating permits, and therefore increases in bonding
requirements could prevent our operations from continuing even if we were in
full compliance with all substantive environmental laws.
We
face strong competition from other mining companies for the acquisition of
new
properties.
Mines
have limited lives and as a result, we seek to replace and expand our reserves
through the acquisition of new properties. In addition, there is a limited
supply of desirable mineral lands available in the United States, Canada and
Mexico and other areas where we would consider conducting exploration and/or
production activities. Because we face strong competition for new properties
from other mining companies, some of which have greater financial resources
than
we do, we may be unable to acquire attractive new mining properties on terms
that we consider acceptable.
The
titles to some of our properties may be uncertain or defective.
Certain
of our United States mineral rights consist of “unpatented” mining claims
created and maintained in accordance with the U.S. General Mining Law of
1872. Unpatented mining claims are unique U.S. property interests, and are
generally considered to be subject to greater title risk than other real
property interests because the validity of unpatented mining claims is often
uncertain. This uncertainty arises, in part, out of the complex federal and
state laws and regulations that supplement the General Mining Law. Also,
unpatented mining claims and related rights, including rights to use the
surface, are subject to possible challenges by third parties or contests by
the
federal government. The validity of an unpatented mining claim, in terms of
both
its location and its maintenance, is dependent on strict compliance with a
complex body of federal and state statutory and decisional law. In addition,
there are few public records that definitively control the issues of validity
and ownership of unpatented mining claims.
In
recent
years, the U.S. Congress has considered a number of proposed amendments to
the General Mining Law. Although no such legislation has been adopted to date,
there can be no assurance that such legislation will not be adopted in the
future. If ever adopted, such legislation could, among other things, impose
royalties on gold production from unpatented mining claims located on federal
lands or impose fees on production from patented mining claims. If such
legislation is ever adopted, it could have an adverse impact on earnings from
our operations, could reduce estimates of our reserves and could curtail our
future exploration and development activity on federal lands or patented claims.
While
we
have no reason to believe that the existence and extent of any of our properties
are in doubt, title to mining properties are subject to potential claims by
third parties claiming an interest in them.
We
may lose rights to properties if we fail to meet payment requirements or
development or production schedules.
We
derive
the rights to most of our mineral properties from unpatented mining claims,
leaseholds, joint ventures or purchase option agreements which require the
payment of maintenance fees, rents, or purchase price installments, exploration
expenditures, or other fees. If we fail to make these payments when they are
due, our rights to the property may lapse. There can be no assurance that we
will always make payments by the requisite payment dates. In addition, some
contracts with respect to our mineral properties require development or
production schedules. There can be no assurance that we will be able to meet
any
or all of the development or production schedules. Our ability to transfer
or
sell our rights to some of our mineral properties requires government approvals
or third party consents, which may not be granted.
Our
operations may be adversely affected by risks and hazards associated with the
mining industry.
Our
business is subject to a number of risks and hazards including adverse
environmental effects, technical difficulties due to unusual or unexpected
geologic formations, and pit wall failures. Such risks could result in personal
injury, environmental damage, damage to and destruction of production
facilities, delays in mining and liability. For some of these risks, we maintain
insurance to protect against these losses at levels consistent with our
historical experience and industry practice. However, we may not be able to
maintain current levels of insurance, particularly if there is a significant
increase in the cost of premiums. Insurance against environmental risks is
generally too expensive or not available for us and other companies in our
industry, and, therefore, we do not maintain environmental insurance. To the
extent we are subject to environmental liabilities, we would have to pay for
these liabilities. Moreover, in the event that we are unable to fully pay for
the cost of remedying an environmental problem, we might be required to suspend
or significantly curtail operations or enter into other interim compliance
measures.
You
could have difficulty or be unable to enforce certain civil liabilities on
us,
certain of our directors and our experts.
We
are a
Yukon Territory, Canada, corporation. Substantially all of our assets are
located outside of Canada and our head office is located in the United States.
Additionally, a number of our directors and the experts that may be named in
this prospectus are residents of Canada. Although we have appointed Lackowicz,
Shier & Hoffman as our agents for service of process in the Yukon
Territory, it might not be possible for investors to collect judgments obtained
in Canadian courts predicated on the civil liability provisions of securities
legislation. It could also be difficult for you to effect service of process
in
connection with any action brought in the United States upon such directors
and
experts. Execution by United States courts of any judgment obtained against
us,
or any of the directors, executive officers or experts named in this prospectus,
in United States courts would be limited to the assets or the assets of such
persons or corporations, as the case might be, in the United States. The
enforceability in Canada of United States judgments or liabilities in original
actions in Canadian courts predicated solely upon the civil liability provisions
of the federal securities laws of the United States is doubtful.
If
we cannot raise additional funds to finance our Black Fox property we may not
be
able to continue as a going concern.
We
do not
have sufficient resources to fully develop the Black Fox project. The Company
is
actively seeking financing for Black Fox; however, the availability and timing
of this financing is not certain at this time.
USE
OF PROCEEDS
All
of
the common shares covered by this prospectus are being sold by the selling
shareholder identified in this prospectus, or by its respective pledgees,
donees, transferees or other successors in interest. We will not receive any
proceeds from the sale by the selling shareholder of these common shares. See
“Selling Shareholder.”
We
are
authorized to issue an unlimited number of common shares, without par value.
As
of February 13, 2006, there were 119,106,451 common shares outstanding.
Dividend
Rights
Holders
of our common shares may receive dividends when, as and if declared by our
board
on the common shares, subject to the preferential dividend rights of any other
classes or series of shares of our company. In no event may a dividend be
declared or paid on the common shares if payment of the dividend would cause
the
realizable value of our company’s assets to be less than the aggregate of its
liabilities and the amount required to redeem all of the shares having
redemption or retraction rights, which are then outstanding.
Voting
and Other Rights
Holders
of our common shares are entitled to one vote per share, and in general, all
matters will be determined by a majority of votes cast.
Election
of Directors
All
of
the directors serve from the date of election or appointment until the earlier
of the next annual meeting of the company’s shareholders or the date on which
their successors are elected or appointed in accordance with the provisions
of
our By-laws and Articles of Incorporation. Directors are elected by a majority
of votes cast.
Liquidation
In
the
event of any liquidation, dissolution or winding up of Apollo, holders of the
common shares have the right to a ratable portion of the assets remaining after
payment of liabilities and liquidation preferences of any preferred shares
or
other securities that may then be outstanding.
Redemption
Apollo
common shares are not redeemable or convertible.
Other
Provisions
All
outstanding common shares are, and the common shares offered by this prospectus
or obtainable on exercise or conversion of other securities offered hereby,
if
issued in the manner described in this prospectus, will be, fully paid and
non-assessable.
This
section is a summary and may not describe every aspect of our common shares
that
may be important to you. We urge you to read our Articles of Incorporation,
as
amended, and our By-laws, because they, and not this description, define your
rights as a holder of our common shares. See “Where You Can Find More
Information” for information on how to obtain copies of these documents.
CIBC
Mellon Trust Company, P. O. Box 7010 Adelaide Postal Station, Toronto,
Ontario M5E 2W9, Canada, is the transfer agent and registrar for our common
shares.
At
February 13, 2006, warrants were outstanding to purchase a total of
24,674,730 common shares.
|
Issued with
|
|
Date Issued
|
|
Number of
shares
issuable upon
exercise
|
|
Exercise
Price
($)
|
|
Expiration Date
|
|
|
Private
Placement
|
|
|
December 23, 2002
|
|
|
3,000,000
|
|
|
2.82
|
* |
|
December 23, 2006
|
|
|
Compensation
Warrants
|
|
|
October 19, 2004
|
|
|
1,000,000
|
|
|
0.80
|
|
|
October 19, 2006
|
|
|
Compensation
Warrants
|
|
|
November 4, 2004
|
|
|
1,400,133
|
|
|
0.80
|
|
|
November 4, 2006
|
|
|
Special
Note Warrants
|
|
|
November 4, 2004
|
|
|
5,253,600
|
|
|
0.80
|
|
|
November 4, 2007
|
|
|
Special
Warrant Warrants
|
|
|
November 4, 2004
|
|
|
1,396,000
|
|
|
0.80
|
|
|
November 4, 2007
|
|
|
Registered
Offering
|
|
|
December 31, 2004
|
|
|
6,224,999
|
|
|
1.00
|
|
|
December 31, 2006
|
|
|
Registered
Offering
|
|
|
January 7, 2005
|
|
|
3,149,998
|
|
|
1.00
|
|
|
January 7, 2007
|
|
|
Compensation
Warrants
|
|
|
June 30, 2005
|
|
|
1,250,000
|
|
|
0.35
|
* |
|
June 30, 2007
|
|
|
Private
Placement
|
|
|
January 26, 2006
|
|
|
2,000,000
|
|
|
0.34
|
* |
|
January 26, 2008
|
|
|
TOTAL
|
|
|
|
|
|
24,674,730
|
|
|
|
|
|
|
|
___________________
*
These
exercise prices are the U.S. dollar equivalents of the Canadian dollar exercise
prices as follows: for the warrants issued December 23, 2002, Cdn$3.25; for
the warrants issued June 30, 2005, Cdn$0.40; and for the warrants issued
January 26, 2006, Cdn$0.39. The U.S. equivalent exercise prices were
calculated based on the noon rate of exchange on February 8, 2006 as reported
by
the Bank of Canada
for the
conversion of Canadian dollars into U.S. dollars, which was Cdn$1.00 equals
$0.8669.
In
addition, 1,250,000 compensation warrants are outstanding. Each compensation
warrant is exercisable at $0.75 for a unit comprised of one common share of
the
Company and 0.75 share purchase warrant, with each whole share purchase warrant
exercisable for one common share of the Company at $1.00 per common share.
The
compensation warrants are immediately exercisable and expire on January 7,
2007. The share purchase warrants are exercisable until January 7,
2007.
TAX
CONSIDERATIONS
U.S. Federal
Income Tax Considerations
The
following is a summary of the material anticipated U.S. federal income tax
consequences regarding the acquisition, ownership and disposition of our common
shares. This summary applies to you only if you acquire common shares, hold
such
common shares as a capital asset (that is, for investment purposes) and are
eligible for benefits under the income tax convention between the U.S. and
Canada signed on September 26, 1980, as amended, currently in force, which
we refer to as the U.S.-Canada tax treaty. This summary is based upon the
U.S. Internal Revenue Code of 1986, as amended, which we refer to as the
Code, regulations promulgated under the Code, administrative rulings and
judicial decisions and the U.S.-Canada tax treaty, as in effect on the date
of
this prospectus supplement. Changes in the laws may alter the tax treatment
of
our common shares, possibly with retroactive effect.
This
summary is general in nature and does not address the effects of any state
or
local taxes, or the tax consequences in jurisdictions other than the
U.S. In addition, it does not address all tax consequences that may be
relevant to you in your particular circumstances, nor does it apply to you
if
you are a holder with a special status, such as:
1. a
person
that owns, or is treated as owning under certain ownership attribution rules,
5%
or more of our voting shares;
2. a
broker,
dealer or trader in securities or currencies;
3. a
bank,
mutual fund, life insurance company or other financial institution;
4. a
tax-exempt organization;
5. a
qualified retirement plan or individual retirement account;
6. a
person
that holds our common shares as part of a straddle, hedge, constructive sale
or
other integrated transaction for tax purposes;
7. a
partnership, S corporation, small business investment company or
pass-through entity;
8. an
investor in a partnership, S corporation, small business investment company
or pass-through entity;
9. a
person
whose functional currency for tax purposes is not the
U.S. dollar;
10. a
person
liable for alternative minimum tax;
11. a
U.S. Holder (as defined below) who is a resident or deemed to be a resident
in Canada pursuant to the Income Tax Act (Canada); and
12. a
Non-U.S. Holder (as defined below) that has a trade or business in the
United States, or is an individual that either has a tax home in the United
States or is present within the United States for 183 days or more during
the taxable year.
If
a
partnership holds common shares, the tax treatment of a partner will generally
depend upon the status of the partner and upon the activities of the
partnership. A partner of a partnership that owns or may acquire common shares
should consult the partner’s tax advisor regarding the specific tax consequences
of the acquisition and ownership of our common shares.
It
is
assumed for purposes of this summary that we are not, have not at any time
been
and will not be after this offering a “controlled foreign corporation,” as
defined in Section 957(a) of the Code.
YOU
SHOULD CONSULT YOUR OWN ADVISOR REGARDING THE TAX CONSEQUENCES OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR COMMON SHARES IN LIGHT OF YOUR
PARTICULAR CIRCUMSTANCES.
U.S. Holders
The
following discussion applies to you if you are a “U.S. Holder.” For
purposes of this discussion, a “U.S. Holder” means a beneficial owner of a
common share that is, for U.S. federal income tax purposes:
1. an
individual citizen or resident of the United States (including aliens who are
“green card holders” or who are present in the U.S., for 31 days or more in
the calendar year and where certain other requirements are met);
2. a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof;
3. an
estate
the income of which is subject to U.S. federal income taxation regardless of
its
source; or
4. a
trust
(1) that validly elects to be treated as a U.S. person for U.S. federal
income tax purposes, or (2) the administration over which a U.S. court can
exercise primary supervision and all of the substantial decisions of which
one
or more U.S. persons have the authority to control.
Distributions
We
do not
anticipate paying dividends in the foreseeable future. However, subject to
the
discussion below under “— Passive foreign investment company,” the gross
amount of distributions, if any, payable by us on our common shares generally
would be treated as dividend income to the extent paid out of current or
accumulated earnings and profits. Any such income would be treated as
U.S. source income for U.S. foreign tax credit purposes to the extent
paid from earnings and profits accumulated by a domestic corporation engaged
in
a U.S. trade or business. A distribution on our shares in excess of current
or accumulated earnings and profits will be treated as a tax-free return of
capital to the extent of the U.S. Holder’s adjusted basis in such shares
and then as capital gain. See “Sale or other disposition of common shares.”
Canadian
withholding tax on dividend distributions paid by us to a U.S. Holder is
generally reduced to 15% pursuant to the U.S.-Canada tax treaty.
U.S. Holders generally may claim the amount of any Canadian income taxes
withheld either as a deduction from gross income or as a credit against
U.S. federal income tax liability, subject to numerous complex limitations,
which must be determined and applied on an individual basis. A
U.S. Holder’s ability to claim such a credit against U.S. federal
income tax liability may be limited to the extent that dividends on our common
shares are treated as having a U.S. source.
Sale
or other dispositions of common shares
Subject
to the discussion found under “— Passive foreign investment company” below,
in general, if you sell or otherwise dispose of common shares in a taxable
disposition:
1. you
will
recognize gain or loss equal to the difference (if any) between the
U.S. dollar value of the amount realized on such sale or other taxable
disposition and your adjusted tax basis in such common shares;
2. any
gain
or loss will be capital gain or loss and will be long-term capital gain or
loss
if your holding period for the common shares sold is more than one year at
the
time of such sale or other taxable disposition; and
3. any
gain
or loss will generally be treated as U.S. source income for
U.S. foreign tax credit purposes, although special rules apply to
U.S. Holders who have a fixed place of business outside the United States
to which this gain is attributable.
Long
term
capital gains of individual taxpayers are generally subject to a 15% maximum
U.S. federal income tax rate, for capital gains recognized before
January 1, 2009. The deductibility of capital losses is subject to
limitations.
If
you
are a cash basis taxpayer who receives foreign currency, such as Canadian
dollars, in connection with a sale or other taxable disposition of common
shares, the amount realized will be based on the U.S. dollar value of the
foreign currency received with respect to such common shares, as determined
on
the settlement date of such sale or other taxable disposition.
If
you
are an accrual basis taxpayer who receives foreign currency in a sale or other
taxable disposition of common shares, you generally may elect the same treatment
required of cash basis taxpayers with respect to a sale or other taxable
disposition of common shares, provided the election is applied consistently
from
year to year. The election may not be changed without the consent of the IRS.
If
you are an accrual basis taxpayer and do not elect to be treated as a cash
basis
taxpayer (pursuant to the U.S. Treasury Regulations applicable to foreign
currency transactions) for this purpose, you might have a foreign currency
gain
or loss for U.S. federal income tax purposes because of differences between
the U.S. dollar value of the foreign currency received prevailing on the
date of the sale or other taxable disposition of our common shares and the
date
of payment. Any such currency gain or loss generally will be treated as ordinary
income or loss and would be in addition to gain or loss, if any, that you
recognized on the sale or other taxable disposition of common shares.
Passive
foreign investment company
U.S. Holders
of common shares would be subject to a special, adverse tax regime (that would
differ in certain respects from that described above) if we were (or were to
become) a passive foreign investment company for U.S. federal income tax
purposes. We do not believe that we are, nor do we expect to become, a passive
foreign investment company. However, the determination of whether a corporation
is a passive foreign investment company is made annually, and may be subject
to
change. There is a possibility that we could become a passive foreign investment
company in the future as a result of future financial results. In general terms,
we will be a passive foreign investment company for any tax year in which either
(i) 75% or more of our gross income is passive income or (ii) the
average percentage, by fair market value, of our assets that produce or are
held
for the production of passive income is 50% or more. “Passive income” includes,
for example, dividends, interest, certain rents and royalties, certain gains
from the sale of stock and securities, and certain gains from commodities
transactions. If we were, or were to become, a passive foreign investment
company for any year in which a U.S. Holder owns our common shares, gain on
a disposition or deemed disposition by the U.S. Holder of our common
shares, and the amount of “excess distributions”, if any, payable on our common
shares, would be subject to tax at the highest marginal rates applicable to
ordinary income, and would be subject to interest charges to reflect the value
of the U.S. income tax deferral, unless (in certain circumstances) the
U.S. Holder has timely made a “mark-to-market” election or a “qualified
electing fund” election.
Non-U.S. Holders
The
following summary applies to you if you are a non-U.S. Holder of common
shares. A non-U.S. Holder is a beneficial owner of common shares that is
not a U.S. Holder.
Distributions
In
general, you will not be subject to U.S. federal income tax or withholding
tax on dividends, if any, received from us with respect to common shares, unless
such income is effectively connected with your conduct of a trade or business
in
the United States or, if a treaty applies, such income is
(instead) attributable to a permanent establishment or fixed base you
maintain in the United States.
Sale
or other disposition of common shares
In
general, you will not be subject to U.S. federal income tax on any gain
realized upon the sale or other disposition of common shares unless:
1. such
gain
is effectively connected with your conduct of a U.S. trade or business or,
if a treaty applies, such gain is attributable to a permanent establishment
or
fixed base you maintain in the United States; or
2. you
are
an individual who is present in the United States for 183 days or more
during the taxable year of disposition or have a tax home in the United States,
and certain other requirements are met.
Information
reporting and backup withholding
U.S. Holders
of our common shares may be subject to information reporting and may be subject
to backup withholding currently at a rate of 28% on distributions on our common
shares or on the proceeds from a sale or exchange of our common shares paid
within the United States. Payments of distributions on, or the proceeds from
the
sale of, our common shares to or through a foreign office of a broker generally
will not be subject to backup withholding, although information reporting may
apply to those payments in certain circumstances. Backup withholding will
generally not apply, however, to a U.S. Holder who:
1. furnishes
a correct taxpayer identification number and certifies that the U.S. Holder
is not subject to backup withholding on IRS Form W-9 (or substitute
form); or
2. is
otherwise exempt from backup withholding.
In
general, a Non-U.S. Holder will not be subject to information reporting and
backup withholding. However, a Non-U.S. Holder may be required to establish
an exemption from information reporting and backup withholding by certifying
the
Non-U.S. Holder’s non-U.S. status on Form W-8BEN.
Backup
withholding is not an additional tax. any amounts withheld from a payment to
a
holder under the backup withholding rules may be credited against the holder’s
U.S. federal income tax liability, and a holder may obtain a refund of any
excess amounts withheld by filing the appropriate claim for refund with the
IRS
in a timely manner.
The
selling shareholder identified below, or its pledgees, donees, assignees,
transferees or other successors in interest, are selling all of the common
shares being offered under this prospectus.
Common
Shares
On
June
3, 2005, we completed a private placement to Jipangu Inc. (“Jipangu”) of
10,000,000 common shares at Cdn$0.40 per share. On January 26, 2006, we
completed another private placement with Jipangu pursuant to which Jipangu
purchased 11,650,000 units priced at Cdn$0.35 per unit, with each unit
consisting of one common share and 0.17167 of a warrant (for total of 2,000,000
warrants), with each whole warrant exercisable at Cdn$0.39 for one common share.
The share purchase warrants are immediately exercisable and expire on
January 26, 2008.
Pursuant
to the first Registration Rights Agreement with Jipangu dated June 1, 2005,
we
agreed to register the common shares sold on June 3, 2005 and keep the
registration effective until the earliest of June 3, 2007, or the date on which
all of the common shares registered for Jipangu hereunder are sold pursuant
to
Rule 144 or a resale registration statement under the Securities Act of 1933,
as
amended (the “Act”). Pursuant to the second Registration Rights Agreement with
Jipangu dated October 17, 2005, we agreed to register the common shares and
the
common shares underlying the share purchase warrants and to keep the
registration statement effective until the earliest date on which all of the
common shares and the common shares underlying the share purchase warrants
registered for Jipangu hereunder are sold pursuant to Rule 144 or a resale
registration statement under the Act, or until all of the common shares are
eligible for resale pursuant to Rule 144(k) of the Act and no additional
common shares are issuable upon exercise of the share purchase warrants.
| |
|
Before the Offering
|
|
|
|
After the Offering
|
|
|
Name of Selling
Stockholder
|
|
Number of
Common
Shares
Beneficially
Owned (1)
|
|
Percentage
of
Common
Shares
Outstanding(2)
|
|
Common
Shares
Registered
for Resale
|
|
Common
Shares
Beneficially
Owned (3)
|
|
Common
Shares
Beneficially
Owned
|
|
|
Jipangu
Inc. (4)
|
|
|
23,650,000
|
(5)
|
|
19.5
|
%
|
|
23,650,000
|
|
|
0
|
|
|
0
|
%
|
| (1) |
Pursuant
to Rule 13d-3 of the Exchange Act, a person is deemed to be the
beneficial owner of a security if that person has the right to acquire
beneficial ownership of such security within 60 days, including the
right to acquire through the exercise of an option or warrant or
through
the conversion of a security.
|
| (2) |
The
percentage ownership for the selling stockholder is based on
119,106,451 common shares outstanding as of January 27, 2006. In
accordance with SEC rules, common shares that may be acquired pursuant
to
warrants that are exercisable as of January 27, 2006, or will become
exercisable within 60 days thereafter, are deemed to be outstanding
and beneficially owned by the person holding such options for the
purpose
of computing such person’s percentage ownership, but are not deemed to be
outstanding for the purpose of computing the percentage ownership
of any
other person.
|
| (3) |
Assumes
that (i) all of the share purchase warrants have expired or that all
of the shares acquired on exercising the share purchase warrants
are sold
and (ii) all of the shares currently beneficially owned by the
selling stockholder and registered hereunder are sold, and (iii) the
selling shareholder acquires no additional common shares before the
completion of this offering.
|
| (4) |
Bull
Palace Corporation, a Japanese corporation, beneficially owns a majority
interest in Jipangu and, therefore, may be deemed to control Jipangu.
Bull
Palace Corporation is a holding company, which is 100% owned by Tamisuke
Matsufuji, the President and Chief Executive Officer of Jipangu,
and his
family.
|
| (5) |
Includes
2,000,000 common shares issuable upon exercise of the outstanding
share purchase warrants outstanding and exercisable as of January
27,
2006. The share purchase warrants were received by the selling shareholder
directly from the Company in a private placement on January 26,
2006.
|
The
common shares covered by this prospectus are being registered to permit public
secondary trading of these securities by the holders thereof from time to time
after the date of this prospectus. All of the common shares covered by this
prospectus are being sold by the selling shareholder or its pledgees, donees,
assignees, transferees or other successors-in-interest. We will not receive
any
of the proceeds from the sale of these common shares.
The
selling shareholder and its pledgees, assignees, donees, or other
successors-in-interest who acquire their shares after the date of this
prospectus may sell the common shares directly to purchasers or through
broker-dealers or agents.
The
common shares may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined
at
the time of sale, or at negotiated prices. Sales may be effected in
transactions, which may involve block transactions or crosses:
|
|
· |
through
the American Stock Exchange or on any national securities exchange
or
quotation service on which the common shares may be listed or quoted
at
the time of sale;
|
|
|
· |
through
the Toronto Stock Exchange in compliance with Canadian securities
laws and
rules of the Toronto Stock Exchange through registered
brokers;
|
|
|
· |
in
the over-the-counter market;
|
|
|
· |
in
transactions otherwise than on exchanges or quotation services, or
in the
over-the counter market;
|
|
|
· |
through
the exercise of purchased or written
options; or
|
|
|
· |
through
any other method permitted under applicable
law.
|
In
connection with sales of the common shares, the selling shareholder may enter
into hedging transactions with broker-dealers, which may in turn engage in
short
sales of the common shares in the course of hedging the positions they assume.
The selling shareholder may also sell short the common shares and deliver the
common shares to close out short positions, or loan or pledge the common shares
to broker-dealers that in turn may sell the common shares.
The
aggregate proceeds to the selling shareholder from the sale of the common shares
offered hereby will be the purchase price of the common shares less discounts
and commissions, if any, paid to broker-dealers. The selling shareholder
reserves the right to accept and, together with its agents from time to time,
to
reject, in whole or in part, any proposed purchase of common shares to be made
directly or through agents.
The
selling shareholder may sell the common shares to or through broker-dealers,
who
may receive compensation in the form of discounts, concessions or commissions
from the selling shareholders or the purchasers. The selling shareholder and
any
broker-dealers or agents that participate in the sale of the common shares
may
be determined to be “underwriters” within the meaning of Section 2(11) of
the Securities Act. Any discounts, commissions, concessions or profit they
earn
on any resale of the shares may be underwriting discounts and commissions under
the Securities Act. If the selling shareholder is an “underwriter” within the
meaning of Section 2(11) of the Securities Act, it will be subject to the
prospectus delivery requirements of the Securities Act.
We
are
not aware of any plans, arrangements or understandings between the selling
shareholder and any underwriter, broker-dealer or agent regarding the sale
of
the common shares by the selling shareholder. The selling shareholder may decide
not to sell any or all of the common shares offered by it pursuant to this
prospectus and may transfer, devise or gift the shares by other means not
described in this prospectus. Moreover, any common shares covered by this
prospectus that qualify for sale pursuant to Rule 144 of the Securities Act
may be sold under Rule 144 rather than pursuant to this prospectus.
If
required, we will distribute a supplement to this prospectus describing any
material changes in the terms of this offering. Subject to the conditions
specified in the Registration Rights Agreements between us and the selling
shareholder, we have the right to suspend the use of this prospectus for up
to
20 consecutive days at any one time, an aggregate of 30 days in any three-month
period, or an aggregate of 60 days in any twelve month period, if we notify
the selling shareholder that: (i) a stop order is in effect, (ii) material
non-public information exists that must be disclosed so that this prospectus,
as
in effect, does not include an untrue statement of a material fact or omit
to
state a material fact required to make the statements in this prospectus, in
light of the circumstances under which they were made, not misleading; or (iii)
due to the occurrence or existence of any development, event, fact, situation,
or circumstances related to the Company, we have determined that it is
appropriate to suspend the availability of this resale registration statement
and the related prospectus.
Lackowicz,
Shier & Hoffman, Yukon Territory, Canada, has provided its opinion on
the validity of the securities offered by this prospectus.
The
consolidated financial statements and management’s report on the effectiveness
of internal control over financial reporting incorporated in this prospectus
by
reference from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2004 have been audited by Deloitte & Touche LLP,
independent registered chartered accountants, as stated in their reports, which
(1) express an unqualified opinion on the financial statements and include
a separate report titled Comments by Auditors on Canada — United States of
America Reporting Differences referring to substantial doubt on the Company’s
ability to continue as a going concern and changes in accounting principles,
(2) express an unqualified opinion on management’s assessment regarding the
effectiveness of internal control over financial reporting, and (3) express
an
adverse opinion on the effectiveness of the Company’s internal control over
financial reporting because of material weaknesses, which are incorporated
herein by reference, and have been so incorporated in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
Our
reserves at December 31, 2004 incorporated by reference herein were
prepared by us and audited by Mine Development Associates. All information
regarding reserves incorporated by reference herein are in reliance upon the
authority of that form as experts in such matters.
DISCLOSURE
OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITY
The
Business Corporations Act (Yukon Territory) imposes liability on officers and
directors for breach of fiduciary duty except in certain specified
circumstances, and also empowers corporations organized under Yukon Territory
law to indemnify officers, directors, employees and others from liability in
certain circumstances such as where the person successfully defended himself
on
the merits or acted in good faith in a manner reasonably believed to be in
the
best interests of the corporation.
Our
By-laws, with certain exceptions, eliminate any personal liability of our
directors and officers to us or our shareholders for monetary damages arising
from such person’s performance as a director or officer, provided such person
has acted in accordance with the requirements of the governing statute. Our
By-laws also provide for indemnification of directors and officers, with certain
exceptions, to the full extent permitted under law which includes all liability,
damages and costs or expenses arising from or in connection with service for,
employment by, or other affiliation with us to the maximum extent and under
all
circumstances permitted by law.
In
addition, we maintain officers’ and directors’ liability insurance with National
Union Fire Insurance Company and XL Specialty Insurance Company. The policies
are effective through June 2006.
You
should rely only on the information incorporated by reference or provided in
this prospectus or any supplement to this prospectus. We have authorized no
one
to provide you with different information. We are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus is accurate as of any date other than
the date on the front of this prospectus.
APOLLO
GOLD CORPORATION
23,650,000
COMMON
SHARES
PROSPECTUS