Unassociated Document
Filed
Pursuant to Rule No. 424(b)(3)
Registration
No. 333-150431
PROSPECTUS
SUPPLEMENT
APOLLO
GOLD CORPORATION
27,079,429
Common Shares
Pursuant
to this prospectus supplement, St Andrew Goldfields Ltd., the selling
shareholder, which we refer to herein as St Andrew or the selling shareholder,
may sell up to 27,079,429 common shares of Apollo Gold Corporation (together
with its subsidiaries, “Apollo,” “we” or “us”) pursuant to an agreement with
Jipangu Inc., a corporation existing under the laws of Japan and which we refer
to herein as Jipangu, pursuant to which the selling shareholder has agreed
to
sell to Jipangu a minimum of 4,000,000 common shares of Apollo and up to a
maximum of 27,000,000 common shares of Apollo, as more fully described under
the
heading “Plan of Distribution” beginning on page S-20 of this prospectus
supplement. Any of the 27,000,000 common shares of Apollo not sold pursuant
to
the agreement with Jipangu, plus an additional 79,429 common shares of Apollo,
may be sold by the selling shareholder from time to time 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. See “Plan of Distribution”
beginning on page S-20 of this prospectus supplement.
The
selling shareholder owns more than 10% of Apollo’s issued and outstanding common
shares and, accordingly, may be deemed an “affiliate” for purposes of U.S.
securities laws. 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 November 6, 2008,
the closing price for our common shares on the American Stock Exchange was
$0.15 per share and the closing price on the Toronto Stock Exchange was
Cdn$0.18 per share.
References
in this prospectus to “$” are to United States dollars. Canadian dollars are
indicated by the symbol “Cdn$”.
The
common shares offered in this prospectus involve a high degree of risk. You
should carefully consider the matters set forth in “Risk Factors” beginning on
page S-7 of this prospectus in determining whether to purchase our common
shares.
Neither
the U.S. Securities and Exchange Commission nor any state securities
commission has approved or disapproved our common shares, or determined if
this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
To
our
knowledge, no underwriter or other person has been engaged to facilitate the
sale of shares of common stock under this prospectus supplement. You should
rely
only on the information contained in this prospectus supplement, the
accompanying prospectus and the information incorporated herein by reference.
We
have not authorized any person to provide you with any information about Apollo
Gold Corporation or the shares of our common stock offered hereby that is
different from the information included in this prospectus supplement and
accompanying prospectus. If anyone provides you with different information,
you
should not rely on it.
The
date
of this prospectus is November 7, 2008.
TABLE
OF CONTENTS
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Page
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S-1
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CURRENCY
AND EXCHANGE RATE INFORMATION
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S-1
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NON-GAAP
FINANCIAL MEASURES
|
S-1
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STATEMENTS
REGARDING FORWARD-LOOKING INFORMATION
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S-2
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|
THE
COMPANY
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S-4
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RISK
FACTORS
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S-7
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USE
OF PROCEEDS
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S-18
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PRICE
RANGE OF OUR COMMON SHARES
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S-18
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SELLING
SHAREHOLDER
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S-19
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PLAN
OF DISTRIBUTION
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S-20
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TAX
CONSIDERATIONS
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S-22
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DESCRIPTION
OF SECURITIES
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S-27
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TRANSFER
AGENT AND REGISTRAR
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S-27
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INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
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S-27
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WHERE
YOU CAN FIND MORE INFORMATION
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S-28
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Page
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IMPORTANT
NOTICE TO READERS
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1
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WHERE
YOU CAN FIND MORE INFORMATION
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1
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INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
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2
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STATEMENTS
REGARDING FORWARD-LOOKING INFORMATION
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2
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OUR
BUSINESS
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4
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RISK
FACTORS
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5
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RATIO
OF EARNINGS TO FIXED CHARGES
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14
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USE
OF PROCEEDS
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14
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DESCRIPTION
OF DEBT SECURITIES
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14
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DESCRIPTION
OF COMMON SHARES
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25
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DESCRIPTION
OF WARRANTS
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26
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SELLING
SHAREHOLDER
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27
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PLAN
OF DISTRIBUTION
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28
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LEGAL
MATTERS
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29
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EXPERTS
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29
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You
should rely only on the information contained or incorporated by reference
in
this prospectus supplement and the accompanying prospectus. See “Incorporation
of Certain Documents by Reference” on page S-27 of this prospectus
supplement. We have not authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not making an offer to sell
these
securities in any jurisdiction where the offer or sale is not permitted.
Information on any of the websites maintained by us does not constitute a part
of this prospectus supplement or the accompanying prospectus. You should assume
that the information appearing in this prospectus supplement and the
accompanying prospectus or any documents incorporated by reference is accurate
only as of their respective dates. Our business, financial condition, results
of
operations and prospects may have changed since those dates.
ABOUT
THIS PROSPECTUS
SUPPLEMENT
This
document is in two parts. The first part is the prospectus supplement, which
describes the specific terms of the sale by the selling shareholder. The second
part, the accompanying prospectus or base prospectus, gives more general
information, some of which may not apply to the sale described in this
prospectus supplement. Generally, when we refer only to the “prospectus,” we are
referring to both this prospectus supplement and the accompanying prospectus
combined, and when we are referring to the “accompanying prospectus,” we are
referring to the base prospectus.
This
prospectus supplement is part of and should be read in conjunction with the
accompanying prospectus. The information we present in this prospectus
supplement may add, update or change information included in the accompanying
prospectus. If information in this prospectus supplement is inconsistent with
the accompanying prospectus, this prospectus supplement will apply and supersede
that information in the accompanying prospectus.
This
prospectus supplement and the accompanying prospectus have been filed with
the
United States Securities and Exchange Commission, which we refer to as the
SEC,
pursuant to a registration statement on Form S-3, which we refer to as the
registration statement.
Our
financial statements are prepared in accordance with generally accepted
accounting principles in Canada, which we refer to as Canadian GAAP. We provide
certain information reconciling our financial information with generally
accepted accounting principles in the United States, which we refer to as U.S.
GAAP.
CURRENCY
AND EXCHANGE RATE INFORMATION
We
report
in United States dollars. Accordingly, all references to “$,” “U.S.$” or
“dollars” in this prospectus supplement refer to United States dollars unless
otherwise indicated. References to “Cdn$” or “Canadian dollars” are used to
indicate Canadian dollar values.
The
noon
rate of exchange on November 6, 2008 as reported by the Bank of Canada for
the
conversion of Canadian dollars into United States dollars was Cdn$1.00 equals
$0.8462 and the conversion of United States dollars was $1.00 equals
Cdn$1.1818.
NON-GAAP
FINANCIAL MEASURES
In
this
prospectus supplement, accompanying prospectus or in the documents incorporated
herein by reference, Apollo Gold 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 Gold’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.
These
measures are not necessarily indicative of operating profit or cash flow from
operations as determined under U.S. GAAP and may not be comparable to similarly
titled measures of other companies. See Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations in Apollo Gold’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and
Item
2 — Management's Discussion and Analysis of Financial Condition and Results of
Operations in Apollo’s Quarterly Report on Form 10-Q for the quarter ended June
30, 2008 for an explanation of these measures.
STATEMENTS
REGARDING FORWARD-LOOKING INFORMATION
This
prospectus and the documents incorporated by reference in this prospectus
contain 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:
| |
·
|
plans
for Black Fox and Huizopa, including development, exploration and
drilling
and the ability to finance
development;
|
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·
|
future
financing of projects by Apollo, including the contemplated $60 to
$70
million debt financing for Black Fox and the $70 million financing
required for the M Pit expansion at Montana
Tunnels;
|
| |
·
|
the
cessation of ore mining at the Montana Tunnels mine, the amount of
stockpiled ore upon cessation of mining and the timing of the processing
thereof, delivery of WARN Act notices to Montana Tunnels employees
and the
decision to undertake the M Pit
expansion;
|
| |
·
|
liquidity
to support operations and debt repayment, in particular the repayment
of
the Series 2007-A convertible debentures due February 23,
2009;
|
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·
|
the
timing of commencement of mining at Black
Fox;
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·
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start-up
of and receipt of new equipment at the Black Fox mill
complex;
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·
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timing
and amount of future cash flows from the Montana Tunnels
mine;
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·
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the
establishment and estimates of mineral reserves and
resources;
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·
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production
and production costs;
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·
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daily
production, mineral recovery rates and mill throughput
rates;
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·
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grade
of ore mined and milled;
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·
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grade
of concentrates produced;
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·
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anticipated
expenditures for development, exploration, and corporate
overhead;
|
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·
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timing
and issue of permits, including the permits necessary to conduct
the M Pit
expansion at the Montana Tunnels
mine;
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·
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expansion
plans for existing properties;
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·
|
estimates
of closure costs;
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·
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estimates
of environmental 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.
|
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:
| |
·
|
changes
in business and economic conditions, including the recent significant
deterioration in global financial and capital
markets;
|
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·
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significant
increases or decreases in gold prices and zinc prices;
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·
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changes
in interest and currency exchange
rates;
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·
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changes
in availability and cost of
financing;
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| |
·
|
timing
and amount of production;
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| |
·
|
unanticipated
grade changes;
|
| |
·
|
unanticipated
recovery or production problems;
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| |
·
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changes
in operating costs;
|
| |
·
|
operational
problems at our mining properties;
|
| |
·
|
metallurgy,
processing, access, availability of materials, equipment, supplies
and
water;
|
| |
·
|
determination
of reserves;
|
| |
·
|
changes
in project parameters;
|
| |
·
|
costs
and timing of development of new reserves;
|
| |
·
|
results
of current and future exploration and development 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 this prospectus under the heading “Risk
Factors.”
|
THE
COMPANY
Overview
The
earliest predecessor to Apollo Gold Corporation was incorporated under the
laws
of the Province of Ontario in 1936. In May 2003, Apollo 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
supplement, accompanying prospectus or the documents incorporated herein by
reference.
Apollo
is
engaged in gold mining including extraction, processing, refining and the
production of by-product metals, as well as related activities including
exploration and development. We are the operator of the Montana Tunnels mine,
which is a 50% joint venture with Elkhorn Tunnels, LLC. The mine, which is
located near Helena, Montana, is an open pit mine and mill producing gold doré
and lead-gold and zinc-gold concentrates.
Apollo
has a development project, 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 concessions at the Huizopa exploration project,
located in the Sierra Madres in Chihuahua, Mexico. The Huizopa project is
subject to an 80% Apollo/20% Mineras Coronado joint venture
agreement.
Montana
Tunnels Mine
During
the second quarter 2008, approximately 1,867,000 tons were mined, of which
885,000 tons were ore. The mill processed 903,000 tons of ore at an average
throughput of 9,900 tons per day for the quarter. In April there was a failure
of the ball mill shell due to cracking which caused a shutdown of the mill
for
three weeks, severely impacting production of metals for the quarter. During
May
the open pit was impacted due to three weeks of rain, plus the fact that mine
crews were idle during the ball mill repair, resulting in ore production for
the
quarter being 1,700,000 tons lower than planned. As at June 30, 2008, the ore
stockpile sitting alongside the mill was 1,310,000 tons. Payable production
in
the second quarter was 9,200 ounces of gold, 96,000 ounces of silver, 2,488,000
pounds of lead and 9,298,000 pounds of zinc. Apollo’s share of this production
is 50%.
Total
cash costs for the second quarter 2008 on a by-product basis were $758 per
ounce
of gold and on a co-product basis they were $842 per ounce of gold, $15.65
per
ounce of silver, $0.95 per lb of lead and $0.79 per lb of zinc. For the second
quarter 2008, the higher cash costs per ounce of gold on a by-product basis
compared to the second quarter 2007 are the result of (1) 16% lower gold
production stemming from the three-week shutdown of the mill, (2) 19% higher
direct costs related to higher cost of consumables such as diesel fuel and
(3) a
35% reduction in by-product credits due to lower zinc prices and lower silver
and lead production.
On
October 22, 2008, we announced that mining of ore at the Montana Tunnels mine
would cease at the end of November 2008. See the disclosure below under the
heading “Recent Developments – Cessation of Mining at Montana Tunnels” for
additional information.
Black
Fox
On
April
14, 2008, we filed a Canadian Instrument, NI 43-101 Technical Report, which
was
prepared to a bankable standard (“bankable feasibility study”). A bankable
feasibility study is a comprehensive analysis of a project’s economics (+/- 15%
precision) used by the banking industry for financing purposes. The table below
summarizes the Black Fox total mineral reserve.
Black
Fox Probable Reserve Statement as of February 29, 2008
|
Mining Method
|
|
Cutoff Grade
Au g/t
|
|
Tonnes
(000)
|
|
Grade
Au g/t
|
|
Contained
Au Ounces
|
|
|
Open Pit
|
|
|
0.88
|
|
|
4,350
|
|
|
5.2
|
|
|
730,000
|
|
|
Underground
|
|
|
3.0
|
|
|
2,110
|
|
|
8.8
|
|
|
600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Probable Reserves
|
|
|
|
|
|
|
|
|
|
|
|
1,330,000
|
|
On
July
28, 2008, we completed the acquisition from St Andrew Goldfields Ltd., which
we
refer to as St Andrew, of a mill and related equipment, infrastructure, property
rights, laboratory and tailings facilities, located near Timmins, Ontario.
The
acquisition was made pursuant to an asset purchase agreement dated June 11,
2008, as amended June 30, 2008 and July 23, 2008, between Apollo and St Andrew.
Pursuant to the asset purchase agreement, St Andrew agreed to sell the mill
complex to Apollo for a purchase price of Cdn$20 million and the refund to
St
Andrew of its bonding commitment at the mill complex in the amount of
approximately Cdn$1.2 million. The Cdn$20 million cash portion of the purchase
price was payable as follows: (i) an initial deposit of Cdn$1.5 million was
paid
by Apollo upon execution of the asset purchase agreement, (ii) Cdn$4 million
was
paid in cash by Apollo to St Andrew on July 3, 2008 with the proceeds of the
RMB
Financing (as described below under “Recent Events – RMB Financing”) and (iii)
Cdn$14.5 million was paid in cash by Apollo to St Andrew on July 28, 2008 with
the proceeds of the unit offering (as described below under “Recent Events”). In
addition, we paid interest of Cdn$134,795 in connection with the July 28, 2008
payment.
Since
April 2008, when we completed the bankable feasibility study on the Black Fox
mine, we have made progress at Black Fox on a number of fronts. Specifically,
we
have received all necessary permits and approvals required to commence mining
activities, initiated removal of the glacial till material which overlays the
open pit and began placing orders for the long lead time items required to
upgrade the Black Fox mill complex. Consequently, assuming we obtain the
necessary financing, we expect to commence mining of the Black Fox open pit
in
March 2009.
Huizopa
Project
During
the second quarter 2008, the helicopter assisted core drilling program on two
identified targets (Puma de Oro and Lobo de Oro) at our Huizopa project was
completed. On August 14, 2008, we announced the results of the core drilling
program on the Puma de Oro exploration target. Twenty five NQ core holes were
drilled on a north-trending zone targeted for drilling based on Apollo’s
geochemical sampling and geologic mapping.
Recent Events
Cessation
of Mining at Montana Tunnels
On
October 22, 2008, we announced that, as at the end of November 2008, we will
have completed mining of ore from the Montana Tunnels open pit operation as
permitted by our current “L Pit” permit. Upon completion of ore mining at the
Montana Tunnels mine, we anticipate that we will have a stockpile of over two
million tons of ore, which we believe is sufficient feed for the Montana Tunnels
mill to continue to produce zinc-gold and lead-gold concentrates for
approximately five more months. We have notified employees at the Montana
Tunnels mine that when mining operations at the L Pit cease at the end of
November 2008, we expect that approximately 100 of the mine’s 200 employees will
be given a 60 day notice of the termination of their employment in compliance
with the U.S. Department of Labor’s Worker Adjustment and Retraining
Notification Act, which we refer to as the “WARN Act.”
We
have
applied for permits to expand the current pit, which expansion plan we refer
to
as the “M Pit project,” and are awaiting the necessary approvals. The permits
for the M Pit project would allow us to begin a 12 month pre-stripping program
that would cost approximately $70 million, during which time no ore would be
produced. We are not currently engaged in discussions with financing sources
for
our $35 million share of the financing costs. The decision to proceed with
the M
Pit project must be agreed to by both Apollo and Elkhorn Tunnels, LLC, our
joint
venture partner at the mine. 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 the following factors:
|
|
· |
receipt
of the necessary permit for the M Pit
project;
|
|
|
· |
securing
financing for the $70 million; and
|
|
|
· |
prices
of gold, silver, lead and zinc and available smelter
terms.
|
RMB
Financing
On
July
1, 2008, our subsidiary, Montana Tunnels Mining, Inc., which we refer to as
Montana Tunnels, entered into an amendment to its existing debt facility with
RMB Australia Holdings Limited, arranged by RMB Resources Inc. of Lakewood,
Colorado. Montana Tunnels originally entered into the debt facility in October
2007 and, in connection therewith, borrowed $8 million from RMB Australia
Holdings Limited. Immediately prior to the entry into the July 2, 2008
amendment, $1,654,000 was outstanding under the debt facility. Under the
amendment to the debt facility, we were granted an additional loan of $5.15
million from RMB Australia Holdings Limited, which we refer to as the RMB
Financing. Immediately following the advancement of the additional loan, the
total amount outstanding under the debt facility was $6,804,000. Repayment
obligations are as follows: $1,654,000 on September 30, 2008, and $1,716,667
on
each of December 31, 2008, March 31, 2009 and June 30, 2009. The primary use
of
funds from the RMB Financing was the payment of Cdn$4,000,000 to St Andrew
on
July 3, 2008 as a partial payment of the purchase price for the mill complex
acquisition.
Early
Repayment of Debt Facility with RMB Australia Holdings Limited
In
connection with the entry into our October 2007 debt facility with RMB Australia
Holdings Limited (which was arranged by RMB Resources Inc. of Lakewood, CO),
we
entered into certain put and call contracts for lead and zinc, which are set
forth below and which were scheduled to expire on September 26,
2008.
|
Contract Type
|
|
Base Metal
|
|
Volume Strike
|
|
Price
|
|
|
Put
|
|
Lead
|
|
567
Tonnes (1,250,020 pounds)
|
|
US$1.40
|
|
|
Call
|
|
Lead
|
|
567
Tonnes (1,250,020 pounds)
|
|
US$1.898
|
|
|
Put
|
|
Zinc
|
|
891
Tonnes (1,964,316 pounds)
|
|
US$1.20
|
|
|
Call
|
|
Zinc
|
|
891
Tonnes (1,964,316 pounds)
|
|
US$1.539
|
|
On
August
22, 2008, we unwound these put and call contracts early as a debt management
decision and realized a gain of $1,556,000. The net proceeds of $1,556,000
plus
additional cash of $108,000 were used to prepay amounts outstanding under the
October 2007 debt facility. The $1,654,000 amount that was prepaid was otherwise
due on September 30, 2008. Consequently, as of August 22, 2008, $4,789,000
remained outstanding under the debt facility.
As
part
of the July 1, 2008 RMB Financing (as described above under the heading “RMB
Financing”) in which Apollo borrowed an additional $5,150,000 under the October
2007 debt facility, Apollo entered into put and call contracts for gold, silver,
lead and zinc as a requirement of the amendment to the October 2007 debt
facility agreement. On October 23,
2008,
we
unwound part of these put and call contracts early since the current value
of
part of the contracts exceeded the December 2008 repayment obligation
($1,716,667 as set forth above) under the debt facility and the proceeds
therefrom of $2,010,000 were applied as follows:
|
1.
|
|
|
Repayment
of principal
|
|
$
|
1,952,000
|
|
|
2.
|
|
|
Interest
to December 31, 2008
|
|
$
|
49,300
|
|
|
3.
|
|
|
Fees
|
|
$
|
8,600
|
|
As
of
October 23, 2008 and after giving effect to the $1,952,000 repayment of
principal described above, Apollo owed $2,837,000 million under the RMB debt
facility, as amended.
Unit
Offering
On
July
24, 2008, we completed an offering of 40,806,500 units for gross proceeds of
Cdn$20,215,750 and US$185,625. The net proceeds of the offering were
approximately Cdn$18,740,000, Cdn$14,500,000 of which were used to fund Apollo’s
acquisition of St Andrews’ mill complex in Timmins, Ontario, with the remainder
to be used for the development of Apollo’s Black Fox project and for general
working capital. Each unit had an issue price of Cdn$0.50 per unit (US$0.495
per
unit for purchasers resident in the United States) and is comprised of one
common share of Apollo and one-half of one common share purchase warrant. Each
whole common share purchase warrant entitles the holder to purchase one common
share of Apollo at a price of Cdn$0.65 for a period of 36 months after the
closing of the offering. The common shares and warrants comprising the units
separated immediately upon closing of the offering.
Flow-Through
Private Placement
On
August
21, 2008, we completed a private placement of 17,000,000 flow-through common
shares for purposes of the Income Tax Act (Canada) at Cdn$0.50 per flow-through
share to raise gross proceeds of Cdn$8,500,000. We intend to use the gross
proceeds of the private placement for the pre-strip of the Black Fox open pit
mine and to incur Canadian Exploration Expenses (as defined under the Income
Tax
(Canada)) at our Black Fox project. The flow-through shares were offered to
residents of Canada pursuant to Regulation S of the U.S. Securities Act of
1933,
as amended.
RISK
FACTORS
An
investment in our common shares involves a high degree of risk. You should
consider the discussion of risks set forth below and the other information
in
this prospectus before purchasing any of our common shares.
The
existence of outstanding rights to purchase common shares may impair our share
price and our ability to raise capital.
Approximately
60.4 million of our common shares are issuable on exercise of warrants, options
or other rights to purchase common shares at prices ranging from $0.20 to $2.24
and a weighted average price of $0.60. In addition, there are approximately
14.9
million common shares issuable upon the conversion of the $7.4 million
outstanding principal amount of convertible debentures issued February 23,
2007
at the option of the holder at a conversion price of $0.50 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 equity 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.
Future
share sales and issuances could impair our share price.
If
Apollo
Gold’s shareholders sell substantial amounts of our common shares, the market
price of our common shares could decrease. Apollo Gold has 219,860,257 common
shares outstanding as at November 7, 2008. In addition, we may sell additional
common shares in subsequent offerings and issue additional common shares to
finance future acquisitions. Apollo Gold cannot predict the size of future
issuances of common shares or the effect, if any, that future issuances and
sales of common shares will have on the market price of our common shares.
Sales
or issuances of large numbers of our common shares, or the perception that
such
sales might occur, may adversely affect prevailing market prices for our common
shares. With any additional issuance of common shares, investors will suffer
dilution to their voting power and we may experience dilution in our earnings
per share.
The
market price of our common shares could experience volatility and could decline
significantly.
Our
common shares are listed on the American Stock Exchange and the Toronto Stock
Exchange. Our share price has declined significantly since 2004, and over the
last year the price of our common shares has fluctuated from a low of $0.11
per
share to a high of $0.74 per share. The stock prices of virtually all companies
have decreased in the fall of 2008 as global economic issues have adversely
affected public markets. Furthermore, 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 global economic issues,
as
well as short-term changes in gold and zinc 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.
Mining
of ore at our Montana Tunnels mine will cease in November
2008.
On
October 22, 2008, we announced that, as at the end of November 2008, we will
have completed mining of ore from the Montana Tunnels open pit operation as
permitted by our current “L Pit” permit. Upon completion of ore mining at the
Montana Tunnels mine, we anticipate that we will have a stockpile of over two
million tons of ore, which we believe is sufficient feed for the Montana Tunnels
mill to continue to produce zinc-gold and lead-gold concentrates for
approximately five more months. We have applied for permits to expand the
current pit, which expansion plan we refer to as the “M Pit project,” and are
awaiting the necessary approvals. The permits for the M Pit project would allow
us to begin a 12 month pre-stripping program that would cost approximately
$70
million, during which time no ore would be produced. We are not currently
engaged in discussions with financing sources for our $35 million share of
the
financing costs. The decision to proceed with the M Pit project must be agreed
to by both Apollo and Elkhorn Tunnels, LLC, our joint venture partner at the
mine. 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
the
following factors:
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receipt
of the necessary permit for the M Pit
project;
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securing
financing for the $70 million; and
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prices
of gold, silver, lead and zinc and available smelter
terms.
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The
Montana Tunnels mine is our only source of revenue and cash flow at this time.
If we are unable or choose not to pursue the M Pit expansion, we will no longer
have any revenues or cash flow once the stockpiled ore at the Montana Tunnels
mine has been processed, which stockpile we expect to exhaust in April or May
2009. In addition, if we choose to and are able to pursue the M Pit expansion,
we expect that the pre-stripping program will take approximately 12 months,
during which time no ore will be produced. As a result, there will be a period
of time after the ore stockpiles from the L Pit have been exhausted and prior
to
production from the M Pit (which period we expect would be a minimum of six
months but could be substantially longer) during which we will have no revenue
or cash flow.
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, conduct the M Pit
expansion at Montana Tunnels or repay the Series 2007-A convertible debentures
due February 23, 2009.
We
do not
currently have sufficient funds to (i) undertake the M Pit expansion at the
Montana Tunnels mine, (ii) conduct all of our planned development activities
at
Black Fox, (iii) complete our planned exploration activities at Huizopa and
(iv)
repay the Series 2007-A convertible debentures due February 23, 2009. The M
Pit
expansion, development of Black Fox and exploration of Huizopa will require
significant capital expenditures. Sources of external financing may include
bank
and non-bank 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.
In
addition, during September and October 2008, the U.S. financial market indexes
experienced steep declines and the available supply of credit generally
tightened following, among other things, the placement of mortgage lenders
Fannie Mae and Freddie Mac into conservatorship of the Federal Housing Finance
Agency, the announcement that Lehman Brothers Holdings Inc. would file for
bankruptcy protection, the proposed sale of Merrill Lynch & Co., the U.S.
government’s emergency loan to ensure American International Group and the
closing of Washington Mutual by the U.S. Office of Thrift Supervision. In light
of these developments, concerns by investors regarding the stability of the
U.S.
financial system could result in less favorable commercial financing terms,
including higher interest rates or costs and tighter operating covenants,
thereby preventing Apollo from completing the contemplated financing of its
properties.
Our
current cash balances, together with expected cash flow from the Montana Tunnels
mine, will not be sufficient to repay the Series 2007-A convertible debentures
due February 23, 2009.
On
February 23, 2007, we sold $8,580,000 aggregate principal amount of Series
2007-A convertible debentures. Each $1,000 principal amount of convertible
debentures is convertible at any time at the option of holder into 2,000 common
shares at a price per share of $0.50. The convertible debentures mature on
February 23, 2009 and, at maturity, the holder will have the option to receive
repayment of the convertible debentures in full, with interest, or to convert
to
common shares at a price of $0.50 per share (subject to adjustment upon the
occurrence of stock splits, stock dividends and similar events). As of November
6, 2008, the price of a share of our common stock on the American Stock Exchange
was $0.15, significantly below the $0.50 conversion price of the convertible
debentures. If the price of our common stock is not excess of $0.50 upon the
maturity of the convertible debentures, we expect that the holders of the
convertible debentures will demand repayment of the principal amount and accrued
but unpaid interest. As of November 7, 2008, convertible debentures with an
aggregate principal amount of $7,400,000 were outstanding. Based on our current
cash balances together with expected cash flows from the Montana Tunnels mine,
we do not believe we will have sufficient cash to repay the convertible
debentures at maturity. We are currently considering our financing options
to
repay the convertible debentures. There can be no assurance that we will be
successful in obtaining financing for repayment of the convertible debentures
or, if we are successful, that the terms will be acceptable.
We
have a history of losses.
With
the
exception of the most recent fiscal year ended December 31, 2007, during which
we had a net income of $2,416,000, we have incurred significant losses. Our
net
losses were $15,587,000 and $22,208,000 for the years ended December 31, 2006
and 2005, respectively. In addition, the Montana Tunnels mine is our only
current source of revenue and we have announced that mining of ore at that
mine
will cease in November 2008 and milling of ore stockpiles will cease in April
or
May 2009. Following the cessation of the milling of these ore stockpiles, we
will no longer have any revenues or cash flow. In addition, if we choose and
are
able to pursue the M Pit expansion, there will be a period of time after the
ore
stockpiles from the L Pit have been exhausted and prior to production from
the M
Pit (which period we expect would be a minimum of six months but could be
substantially longer) during which we will have no revenue or cash flow.
Therefore, we expect that we will incur significant losses until such time,
if
any, that we begin production from Black Fox and can be no assurance that we
will achieve or sustain profitability in the future.
Our
earnings may be affected by metals price volatility, specifically the volatility
of gold and zinc prices.
We
historically have derived all of our revenues from the sale of gold, silver,
lead and zinc, and our development and exploration activities are focused on
gold. As a result, our future earnings are directly related to the price of
gold. 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.
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
operating expenses could increase significantly if utilities, equipment, fuel
or
raw materials prices increase.
We
are a
significant consumer of electricity, mining equipment, fuels and raw materials,
all of which we purchase from outside sources. Recent fluctuations in crude
oil
have considerably increased our operating expenses, particularly the cost of
diesel fuel, equipment and other raw materials. Accordingly, increases in prices
for electricity, equipment, fuel and raw materials adversely affect our
profitability.
Our
investments in auction rate securities are subject to risks which may cause
losses and affect the liquidity of these investments.
We
acquired auction rate securities in 2007 with a face value of $1.5 million.
The
securities were marketed by financial institutions with auction reset dates
at
28 day intervals to provide short-term liquidity. All such auction rate
securities were rated AAA when purchased, pursuant to Apollo’s investment
policy. Beginning in August 2007, a number of auctions failed and there is
no
assurance that auctions for the auction rate securities in our investment
portfolio, which currently lack liquidity, will succeed. An auction failure
means that the parties wishing to sell their securities could not do so as
a
result of a lack of buying demand. As at June 30, 2008, Apollo’s auction rate
securities held an adjusted cost basis and fair value of $1.3 million based
on
liquidity impairments to these securities and, during the second quarter of
2008, were downgraded to a AA rating. Uncertainties in the credit and capital
markets could lead to further downgrades of Apollo’s auction rate securities
holdings and additional impairments. Furthermore, as a result of auction
failures, our ability to liquidate and fully recover the carrying value of
our
auction rate securities in the near term may be limited or not
exist.
Substantially
all of our assets are pledged to secure our indebtedness.
Substantially
all of the Montana Tunnels assets and our Black Fox property are pledged to
secure indebtedness outstanding under the Facility Agreement, dated October
12,
2007 and as amended July 1, 2008, by and among Montana Tunnels Mining, Inc.,
Apollo, Apollo Gold, Inc., a wholly owned subsidiary of Apollo, RMB Australia
Holdings Limited and RMB Resources Inc. Since these assets represent
substantially all of our assets, we will not have access to additional secured
lending, which will require us to raise additional funds through unsecured
debt
and equity offerings. Default under our debt obligations would entitle our
lenders to foreclose on our assets.
Our
Huizopa exploration project is subject to political and regulatory
uncertainty.
Our
Huizopa exploration project is located in the northern part of the Sierra Madres
in the State of Chihuahua, Mexico. There are numerous risks inherent in
conducting business in Mexico, including political and economic instability,
exposure to currency fluctuations, greater difficulties in accounts receivable
collection, difficulties in staffing and managing operations and potentially
adverse tax consequences. In addition, our ability to explore and develop our
Huizopa exploration project is subject to maintaining satisfactory relations
with the Ejido Huizopa, which is a group of local inhabitants who under Mexican
law are granted rights to conduct agricultural activities and control surface
access on the property. In 2006, we entered into an agreement with the Ejido
Huizopa pursuant to which we agreed to make annual payments to the Ejido Huizopa
in exchange for the right to use the land covering our mining concessions for
all activities necessary for the exploration, development and production of
potential ore deposits. There can be no assurances that the Ejido Huizopa will
continue to honor the agreement. If we are unable to successfully manage our
operations in Mexico or maintain satisfactory relations with the Ejido Huizopa,
our development of the Huizopa property could be hindered or terminated and,
as
a result, our business and financial condition could be adversely
affected.
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, and lead to a reduction in reserves.
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, including difficulty in obtaining financing
and a decrease in our stock price. 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
have experienced operational problems at our Montana Tunnels
mine.
Since
the
sale of our Florida Canyon and Standard mines in November 2005, all of our
revenues have been derived from our milling operations at the Montana Tunnels
mine, which is a low-grade mine. Historically, the Montana Tunnels mine has
been
unprofitable. 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. Throughout 2005, we experienced operational problems,
particularly in the open pit, leading to the suspension of mining on October
21,
2005 for safety reasons due to increased wall activity in the open pit. After
the suspension of mining and until May 12, 2006, we were able to continue to
produce gold doré, lead-gold and zinc-gold concentrates from milling low-grade
stockpiled ore. However, on May 12, 2006, all operations ceased at the mine
and
it was placed on care and maintenance. On July 28, 2006, we entered into a
joint
venture agreement with Elkhorn Tunnels, LLC, in respect of the Montana Tunnels
mine pursuant to which Elkhorn Tunnels made financial contributions in exchange
for a 50% interest in the mine. Mill operations recommenced in March 2007.
In
April and May 2008, the mill at the Montana Tunnels mine was shut down for
approximately three weeks due to a crack in the exterior shell of the ball
mill.
There can be no assurances that we will not encounter additional operational
problems at our Montana Tunnels mine in the future.
We
may not achieve our production estimates.
We
prepare estimates of future production for our operations. We develop 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 not yet in
production and to the Montana Tunnels mine expansion. 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 and expansion projects are
subject to financing contingencies, 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.
We
are
engaged 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, the M Pit
expansion at Montana Tunnels 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 Black
Fox property that we are developing or any future M Pit expansion at Montana
Tunnels will be profitable.
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 remediating an environmental problem, we might be required to
suspend or significantly curtail operations or enter into other interim
compliance measures.
Mineral
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
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. Over this
period, with the exception of the fiscal year 2007, we have not generated
sufficient revenues to cover our expenses and costs.
The
titles to some of our properties may be uncertain or
defective.
Certain
of our United States mineral rights of the Montana Tunnels mine 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 our rights to mine on any of our properties
are
in doubt, title to mining properties are subject to potential claims by third
parties claiming an interest in them and, in September 2006 some of our claims
associated with our Black Fox project were listed as reopened for staking on
the
Ministry of Northern Development and Mines (MNDM) website. Five of these claims
totaling 185 acres were immediately staked by local prospectors. None of these
reserves or resources at our Black Fox project are located on the properties
related to these claims. All of these overstaked claims have since been returned
to us.
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, 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.
We
face substantial governmental regulation.
Safety.
Our
U.S. mining operation is 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 bonds in
accordance with regulatory determinations is a condition to the right to operate
under all material operating permits, and therefore increases in bonding
requirements could prevent our operations from continuing even if we were in
full compliance with all substantive environmental laws.
We
face strong competition from other mining companies for the acquisition of
new
properties.
Mines
have limited lives and as a result, we may seek to replace and expand our
reserves through the acquisition of new properties. In addition, there is a
limited supply of desirable mineral lands available in the United States, 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, most of which have greater financial resources
than
we do, we may be unable to acquire attractive new mining
properties.
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 Chief Financial Officer and
Senior Vice President-Finance and Corporate Development. 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 such officers. We
currently do not carry key person insurance on any of these individuals, and
the
loss of one or more of them could have a material adverse effect on our
operations.
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” (a “PFIC”) for U.S.
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 ability to predict or control, and we can not assure you that
we
will not become a PFIC in the future. If we are or become a PFIC, a U.S.
taxpayer who disposes of (or is deemed to dispose of) our common shares at
a
gain or who receives a so-called “excess distribution” on our common shares
generally would be subject to a special adverse tax regime. Such gains and
excess distributions would be allocated ratably to the U.S. taxpayer’s holding
period. The current year’s allocation would be includible as ordinary income in
the current year. Prior year’s allocations would be taxed at the highest
marginal rate applicable to ordinary income for each such year and would be
subject to interest charges to reflect the value of the U.S. income tax
deferral. Additional special adverse rules also apply to investors who are
U.S.
taxpayers who own our common shares if we are a PFIC and have a non-U.S.
subsidiary that is also a PFIC. Special estate tax rules could be applicable
to
our common shares if we are a PFIC.
Possible
hedging activities could expose us to losses.
In
connection with our borrowing with RMB Australia Holdings Limited, we were
required to enter into hedges on gold, silver, lead and zinc. These hedges
cover
the first quarter 2009 production from the Montana Tunnels mine and represent
approximately 40% of our share of gold and silver and 50% of our share of lead
production from the Montana Tunnels mine. There is no outstanding hedge on
zinc
production. 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. 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.
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. While our chief executive officer is
located in the United States, many of our assets are located outside of the
United States. Additionally, a number of our directors and the experts named
in
this prospectus are residents of Canada. It might not be possible for investors
in the United States to collect judgments obtained in United States courts
predicated on the civil liability provisions of U.S. 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 identified in this prospectus
or
documents incorporated by reference herein, 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.
USE
OF PROCEEDS
All
of
the common shares covered by this prospectus are being sold by the selling
shareholder identified in this prospectus. We will not receive any proceeds
from
the sale by the selling shareholder of these common shares. See “Selling
Shareholder.”
PRICE
RANGE OF OUR COMMON SHARES
Our
common shares are listed on the American Stock Exchange under the trading symbol
“AGT” and on the Toronto Stock Exchange under the trading symbol “APG.” As of
November 7, 2008, 219,860,257 common shares were outstanding, and we had
approximately 976 shareholders of record. On November 6, 2008, the closing
price
for our common shares on the American Stock Exchange was $0.15 per share and
the
closing price on the Toronto Stock Exchange was Cdn$0.18 per share.
The
following table sets forth, for the periods indicated, the reported high and
low
market closing prices per share of our common shares.
| |
|
American
Stock
Exchange
|
|
Toronto
Stock
Exchange
|
|
| |
|
High
|
|
Low
|
|
High
|
|
Low
|
|
| |
|
($)
|
|
Cdn$
|
|
| |
|
|
|
|
|
|
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
0.74
|
|
|
0.49
|
|
|
0.72
|
|
|
0.50
|
|
|
Second
Quarter
|
|
|
0.70
|
|
|
0.51
|
|
|
0.71
|
|
|
0.53
|
|
|
Third
Quarter
|
|
|
0.54
|
|
|
0.24
|
|
|
0.51
|
|
|
0.25
|
|
|
Fourth
Quarter (through November 7, 2008)
|
|
|
0.25
|
|
|
0.11
|
|
|
0.27
|
|
|
0.13
|
|
|
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
0.74
|
|
|
0.44
|
|
|
0.85
|
|
|
0.52
|
|
|
Second
Quarter
|
|
|
0.52
|
|
|
0.40
|
|
|
0.59
|
|
|
0.42
|
|
|
Third
Quarter
|
|
|
0.56
|
|
|
0.39
|
|
|
0.56
|
|
|
0.42
|
|
|
Fourth
Quarter
|
|
|
0.61
|
|
|
0.45
|
|
|
0.60
|
|
|
0.44
|
|
|
2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
0.75
|
|
|
0.28
|
|
|
0.88
|
|
|
0.32
|
|
|
Second
Quarter
|
|
|
0.85
|
|
|
0.41
|
|
|
0.97
|
|
|
0.47
|
|
|
Third
Quarter
|
|
|
0.50
|
|
|
0.35
|
|
|
0.58
|
|
|
0.40
|
|
|
Fourth
Quarter
|
|
|
0.51
|
|
|
0.30
|
|
|
0.58
|
|
|
0.36
|
|
We
have
not declared or paid cash dividends on our common shares since our inception.
Future dividend decisions will consider our then-current business results,
cash
requirements and financial condition. In addition, our existing debt facility
with RMB and its affiliated entities currently restricts our ability to pay
dividends.
SELLING
SHAREHOLDER
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.
The
table
below includes information regarding ownership of our common stock by the
selling shareholder named therein and the number of shares that may be sold
by
it under this prospectus. The selling shareholder owns more than 10% of Apollo’s
issued and outstanding common shares and, accordingly, may be deemed an
“affiliate” for purposes of U.S. securities laws. We have prepared this table
based on representations made to us by the selling shareholder.
The
selling shareholder may offer and sell, from time to time, some or all of the
shares covered by this prospectus. We have registered the shares covered by
this
prospectus for offer and sale by the selling shareholder so that those shares
may be freely sold to the public by it. Registration of the shares covered
by
this prospectus does not mean, however, that those shares necessarily will
be
offered or sold.
|
Name and Address
|
|
Shares Beneficially Owned Prior
to the Offering (1)
|
|
Common
Shares Offered
Hereby
|
|
Shares Beneficially
Owned After Sale of Common
Shares Offered Hereby
|
|
|
of Beneficial Owner
|
|
Number
|
|
Percentage
(3)
|
|
Number
|
|
Number (2)
|
|
Percentage (3)
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
St
Andrew Goldfields Ltd.(4)
1540
Cornwall Road
Suite
212
Oakville,
Ontario
Canada
L6J 7W5
|
|
|
30,679,429
(5
|
)
|
|
13.95%
|
|
|
27,079,429
|
|
|
3,600,000
|
|
|
1.6%
|
|
(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)
Assumes that all of the shares currently beneficially owned by the selling
shareholder and registered hereunder are sold and the selling shareholder
acquires no additional common shares before the completion of this
offering.
(3)
The
percentage ownership for the selling shareholder is based on 219,860,257 common
shares outstanding as of November 7, 2008.
(4)
The
selling shareholder owns more than 10% of Apollo’s issued and outstanding common
shares and, accordingly, may be deemed an “affiliate” for purposes of U.S.
securities laws. Herbert Abramson, Stephen Burns, Jacques Perron, Paul C. Jones,
Warren Seyffert, Bernard Kraft, Gerald A. Slan, Louis Gignac, Ben Au, Linda
Weinzettl, Michael Michaud and Duncan Middlemiss are officers and/or directors
of St Andrew and exercise the voting and dispositive powers with regard to
the
shares being offered by this selling shareholder.
(5)
Comprised of (i) 29,479,429 common shares and (ii) 1,200,000 common shares
issuable upon exercise of the common shares purchase warrants purchased by
the
selling shareholder in the unit offering completed on July 24,
2008.
PLAN
OF DISTRIBUTION
The
selling shareholder has entered into an agreement with Jipangu pursuant to
which
the selling shareholder has agreed to sell a minimum of 4,000,000 common shares
of Apollo to Jipangu and up to a maximum of 27,000,000 common shares of Apollo,
as follows:
| |
·
|
First
Tranche:
2,000,000 common shares for a purchase price of Cdn$500,000 on or
before
November 5, 2008 or such later date as the parties may
agree;
|
| |
·
|
Second
Tranche:
2,000,000 common shares for a purchase price of Cdn$500,000 on or
before
November 25, 2008;
|
| |
·
|
Third
Tranche:
If Jipangu acquires both the First Tranche shares and the Second
Tranche
shares, Jipangu shall have a one-time option to purchase up to an
additional 23,000,000 common shares on or before December 15, 2008
at a
price of Cdn$0.25 per share, in each case subject to and in accordance
with the terms of the agreement.
|
The
sale
of shares of common stock of Apollo by the selling shareholder to Jipangu
pursuant to and in accordance with the agreement will be made without the use
of
underwriters or agents.
In
addition, the selling shareholder may sell any of the 27,000,000 common shares
of Apollo not sold pursuant to the agreement with Jipangu, plus an additional
79,429 common shares of Apollo, from time to time in transactions more fully
described below or by any other method permitted by applicable law.
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.
|
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 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.
In
connection with sales of the common shares or otherwise, the selling shareholder
may enter into hedging transactions with broker-dealers, which may in turn
engage in short sales of the shares in the course of hedging the positions
they
assume. The selling shareholder may also sell short the shares and deliver
the
shares to close out short positions, or loan or pledge the shares to
broker-dealers that in turn may sell the 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.
In
order
to comply with the securities laws of some states, if applicable, the common
shares may be sold in these jurisdictions only through registered or licensed
brokers or dealers. In addition, in some states the shares may not be sold
unless they have been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied
with.
The
selling shareholder may sell the 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.
If
required, we will distribute a supplement to this prospectus describing any
material changes in the terms of this offering. We may suspend the use of this
prospectus if we notify the selling shareholder that our board of directors
has
determined that the sale of our common shares at such time would be detrimental
to us and our stockholders or if 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 not misleading.
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 hold such common shares as
a
capital asset and are eligible for benefits under the Convention between the
United States of America and Canada with Respect to Taxes on Income and on
Capital signed on September 26, 1980, as amended and 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. 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 United
States. 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:
|
·
|
a
person that owns, or is treated as owning under certain ownership
attribution rules, 5% or more of our voting
shares;
|
|
·
|
a
broker, dealer or trader in securities or currencies;
|
|
·
|
a
bank, mutual fund, life insurance company or other financial
institution;
|
|
·
|
a
tax-exempt organization;
|
|
·
|
a
qualified retirement plan or individual retirement account;
|
|
·
|
a
person that holds our common shares as part of a straddle, hedge,
constructive sale or other integrated transaction for tax
purposes;
|
|
·
|
a
partnership, S corporation, small business investment company or
pass-through entity;
|
|
·
|
an
investor in a partnership, S corporation, small business investment
company or pass-through entity;
|
|
·
|
a
person whose functional currency for tax purposes is not the U.S.
dollar;
|
|
·
|
a
person liable for alternative minimum tax;
|
|
·
|
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
|
|
·
|
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 (including for this purpose any entity treated as a partnership
for
U.S. federal income tax purposes) holds our 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 our common shares should consult the partner’s tax advisor regarding the
specific tax consequences of the acquisition and ownership of our common
shares.
We
believe 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, although we can provide no certainty regarding this position.
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:
|
·
|
an
individual citizen or resident of the United States (including an
alien
who is a “green card” holder or who is present in the United States for 31
days or more in the calendar year and meets certain other
requirements);
|
| |
|
|
·
|
a
corporation created or organized in or under the laws of the United
States
or any political subdivision
thereof;
|
|
·
|
an
estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
|
|
·
|
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 under “— Passive foreign investment company,” below, 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. Such
dividends will generally be “qualified dividends” in the hands of individual
U.S. Holders and will be generally subject to a 15% maximum individual U.S.
federal income tax rate for qualified dividends received in taxable years
beginning before January 1, 2011. A corporation may be eligible for a dividends
received deduction under Section 243 of the Code.
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” below.
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 that 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 U.S.-source
income for U.S. foreign tax credit purposes. To the extent that a distribution
with respect to our common shares
is paid
from earnings and profits accumulated by a domestic corporation engaged in
a
U.S. trade or business
(such as
a U.S. subsidiary), any such income would be treated as U.S.-source income
for
U.S. foreign tax credit purposes.
Sale
or other disposition of common shares
Subject
to the discussion under “— Passive foreign investment company” below, in
general, if you sell or otherwise dispose of our common shares in a taxable
disposition:
|
·
|
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;
|
|
·
|
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
|
|
·
|
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 in taxable years
beginning before January 1, 2011. 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 our 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 our common shares, you generally may elect the same
treatment required of cash basis taxpayers with respect to a sale or other
taxable disposition of such 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
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,
recognized on the sale (or other taxable disposition) of our common
shares.
Passive
foreign investment company
PFIC
Rules Generally.
U.S.
Holders of our 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 (“PFIC”) for U.S. federal
income tax purposes. The tests for determining PFIC status are applied annually
and are dependent upon a number of factors, some of which are beyond our
control. We do not expect to be a PFIC for the 2008 tax year, although we
can provide no certainty concerning this result. For 2009 and later tax years,
we can provide no assurance concerning whether we will be a
PFIC.
In
general terms, we will be a PFIC for any tax year in which either (i) 75% or
more of our gross income is passive income (the “income test”) 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 (the “asset test”). “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. For example, we could be a PFIC for a tax year if
we
have (i) losses from sales activities but interest income (and/or other passive
income) that exceeds those losses or (ii) positive gross profit from sales
but
interest income (and/or other passive income) constitutes 75% or more of our
total gross income. In such situations, we could be a PFIC even without
recognizing substantial amounts of passive income.
If
we
were, or were to become, a PFIC for any year in which a U.S. Holder owns our
common shares, gain on a disposition or deemed disposition of our common shares,
and certain distributions with respect to our common shares (so-called “excess
distributions”), would be subject to a special adverse tax regime. Such gains
and excess distributions would be allocated ratably to the U.S. Holder’s holding
period. The portion
of such gains and excess distributions allocable to the current tax year would
be includible as ordinary income in the current
tax.year. The U.S. Holder would be taxed on prior years’ allocations at the
highest marginal rates applicable to ordinary income for each such year and
would be subject to interest charges to reflect the value of the U.S. income
tax
deferral. U.S. Holders must report any gains or distributions received from
a
PFIC by filing a Form 8621 with their returns.
Certain
elections may sometimes be used to reduce the adverse impact of the PFIC rules
on U.S. Holders (“qualifying electing fund” (“QEF”) and “mark-to-market”
elections), but these elections may accelerate the recognition of taxable income
and may result in the recognition of ordinary income. The
PFIC
rules are extremely complex, and shareholders are urged to consult their own
tax
advisers regarding the potential consequences to them of Apollo being classified
as a PFIC.
QEF
Election to Reduce Impact of PFIC Rules. The rules described above for
"excess distributions" will not apply to a U.S. Holder if the U.S. Holder makes
a QEF election for the first taxable year of the U.S. Holder's holding period
for our common shares during which we are a PFIC and we comply with specified
reporting requirements. A QEF election for a taxable year generally must be
made
on or before the due date (as may be extended) for filing the taxpayer's U.S.
federal income tax return for the year. A U.S. Holder who makes a QEF election
generally must report on a current basis his or her share of our ordinary income
and net capital gain for any taxable year in which we are a PFIC, whether or
not
we distribute those earnings.
Upon
request, we will use reasonable best efforts to provide to a U.S. Holder who
makes a request the information required to make a QEF election no later than
ninety days after the request. A U.S. Holder who makes a QEF election must
file
a Form 8621 with their annual return.
Mark-to-Market
Election to Reduce Impact of PFIC Rules.
If we
become a PFIC, a U.S. Holder of our common shares may elect to recognize any
gain or loss on our common shares on a mark-to-market basis at the end of each
taxable year, so long as the common shares are regularly traded on a qualifying
exchange. The mark-to-market election under the PFIC rules is an alternative
to
the QEF election. We believe
our common shares will be regularly traded on a qualifying exchange, but
we cannot
provide assurance that our common shares will be considered regularly traded
on
a qualifying exchange for all years in which we may be a PFIC. A U.S. Holder
who
makes a mark-to-market election generally must recognize as ordinary income
all
appreciation inherent in the U.S. Holder’s investment in our common shares on a
mark-to-market basis and may recognize losses inherent in our common shares
only
to the extent of prior mark-to-market gain recognition. The mark-to-market
election must be made by the due date (as may be extended) for filing the
taxpayer's federal income tax return for the first year in which the election
is
to take effect. A
U.S.
Holder who makes a mark-to-market election must file a Form 8621 with their
annual return.
Rules
for Lower-Tier PFIC Subsidiaries. Special adverse rules apply to U.S.
Holders of our common shares for any year in which we are a PFIC and have a
non-U.S. subsidiary that is also a PFIC (a “lower tier PFIC”). If we are a PFIC
and a U.S. Holder of our common shares does not make a QEF election (as
described above) in respect of any lower tier PFIC, the U.S. Holder could incur
liability for the deferred tax and interest charge described above if (i) we
receive a distribution from, or dispose of all or part of our interest in,
the
lower tier PFIC or (ii) the U.S. Holder disposes of all or part of our common
shares. A QEF election that is made for our common shares will not apply to
a
lower tier PFIC although
a separate QEF election might be made with respect to a lower-tier PFIC. We
will
use reasonable best efforts to cause a lower-tier PFIC to provide
the
information necessary for
an
effective QEF election to be made with respect to such lower-tier
PFIC.
Moreover, a mark-to-market election (as described above) is not available for
lower-tier PFICs.
Non-U.S.
Holders
The
following summary applies to you if you are a non-U.S. Holder of our common
shares. A non-U.S. Holder is a beneficial owner of a common share 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 our common shares, unless
such income is (i) effectively connected with your conduct of a trade or
business in the United States or (ii) if a treaty applies, such income is
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 our common shares unless:
|
·
|
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
|
|
·
|
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 other disposition of our
common shares paid within the United States. Payments of distributions on,
or
the proceeds from the sale or other disposition 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:
|
·
|
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
|
|
·
|
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.
DESCRIPTION
OF SECURITIES
We
are
authorized to issue an unlimited number of common shares, without par value.
As
of November 7, 2008, there were 219,860,257 common shares were outstanding.
For
a description of our common shares, see “Description of Common Shares” on page
25 of the accompanying prospectus.
TRANSFER
AGENT AND REGISTRAR
The
transfer agent and registrar for our common shares is CIBC Mellon Trust Company,
320 Bay Street, P. O. Box 1, Toronto, Ontario M5H 4A6,
Canada.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
The
SEC
allows us to “incorporate by reference” our publicly filed reports into this
prospectus supplement, which means that information included in those reports
is
considered part of this prospectus supplement. Information that we file with
the
SEC after the date of this prospectus supplement will automatically update
and
supersede the information contained in this prospectus supplement 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, 2007,
filed with the SEC on March 25,
2008;
|
|
|
2. |
Our
Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008
and
June 30, 2008, filed with the SEC on May 12, 2008 and August 14,
2008,
respectively;
|
|
|
3. |
Our
Current Reports on Form 8-K, filed with the SEC on March 31, 2008;
May 8, 2008; June 11, 2008; July 1, 2008; July 2, 2008; July 10,
2008;
July 24, 2008; July 24, 2008; July 25, 2008; July 30, 2008; August
6,
2008; August 15, 2008; August 26, 2008, August 27, 2008, August 29,
2008,
October 23, 2008, October 24, 2008 and October 27, 2008;
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 that 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.
WHERE
YOU CAN FIND MORE INFORMATION
We
have
filed with the SEC a Registration Statement on Form S-3, under the Securities
Act of 1933, as amended, with respect to the securities offered by this
prospectus supplement. This prospectus supplement, 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 our securities.
We
file
annual, quarterly and special reports and other information with the SEC. You
may read and copy the registration statement and any other document that we
file
at the SEC’s public reference room located at Judiciary Plaza, 100 F Street,
N.E., Room 1580, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330
for
further information on the public reference rooms. Our SEC filings are also
available to you free of charge at the SEC’s web site at http://www.sec.gov.
PROSPECTUS
APOLLO
GOLD CORPORATION
$100,000,000
Debt Securities, Common Shares and Warrants
28,675,000
Shares of Common Shares Offered by the Selling Shareholder
Apollo
Gold Corporation (together with its subsidiaries, “Apollo Gold,” “we,” “us,” or
“our company”) may use this prospectus to offer and sell from time to time our
debt securities, common shares or warrants, in one or more transactions up
to a
total dollar amount of $100,000,000. The selling shareholder identified on
page
27 may also use this prospectus to offer and sell an aggregate of up to
28,675,000 shares of our common shares. Apollo Gold Corporation will not receive
any proceeds from the sale of the shares being sold by the selling
shareholder.
This
prospectus provides you with a general description of the securities that we
may
offer. The accompanying prospectus supplement sets forth specific information
with regard to the particular securities being offered and may add, update
or
change information contained in this prospectus. You should read both this
prospectus and the prospectus supplement, together with any additional
information which is incorporated by reference into this
prospectus.
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 April 21, 2008, the
closing price for our common shares on the American Stock Exchange was $0.68
per
share and the closing price on the Toronto Stock Exchange was Cdn$0.68 per
share.
The
selling shareholder may sell the shares in transactions on the American Stock
Exchange or the Toronto Stock Exchange and by any other method permitted by
applicable law. The selling shareholder may sell the shares at prevailing market
prices or at prices negotiated with purchasers and will be responsible for
any
commissions or discounts due to brokers or dealers. The amount of these
commissions or discounts cannot be known at this time because they will be
negotiated at the time of the sales. See “Plan of Distribution” beginning on
page 28.
References
in this prospectus to “$” are to United States dollars. Canadian dollars are
indicated by the symbol “Cdn$”.
This
prospectus may not be used to offer and sell securities unless accompanied
by
the applicable prospectus supplement.
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 5 of this prospectus in determining whether to purchase our
securities.
Neither
the 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 7, 2008.
TABLE
OF CONTENTS
| |
Page
|
| |
|
|
IMPORTANT
NOTICE TO READERS
|
1
|
|
WHERE
YOU CAN FIND MORE INFORMATION
|
1
|
|
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
|
2
|
|
STATEMENTS
REGARDING FORWARD-LOOKING INFORMATION
|
2
|
|
OUR
BUSINESS
|
4
|
|
RISK
FACTORS
|
5
|
|
RATIO
OF EARNINGS TO FIXED CHARGES
|
14
|
|
USE
OF PROCEEDS
|
14
|
|
DESCRIPTION
OF DEBT SECURITIES
|
14
|
|
DESCRIPTION
OF COMMON SHARES
|
25
|
|
DESCRIPTION
OF WARRANTS
|
26
|
|
SELLING
SHAREHOLDER
|
27
|
|
PLAN
OF DISTRIBUTION
|
28
|
|
LEGAL
MATTERS
|
29
|
|
EXPERTS
|
29
|
You
should rely only on information contained or incorporated by reference in this
prospectus. Neither we nor the selling shareholder have authorized anyone to
provide you with information different from that contained or incorporated
in
this prospectus.
Neither
we nor the selling shareholder are making an offer of these securities in any
jurisdiction where the offering is not permitted.
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.
IMPORTANT
NOTICE TO READERS
This
prospectus is part of a registration statement that we filed with the Securities
and Exchange Commission, or SEC, using a “shelf” registration process on Form
S-3. Under the shelf registration, we may sell any combination of the securities
described in this prospectus in one or more offerings up to a total dollar
amount of $100,000,000. In addition, St Andrew Goldfields may from time to
time
offer and sell up to 28,675,000 shares of our common shares in one or more
underwritten offerings under this registration statement.
This
prospectus provides you with a general description of the securities that we
or
St Andrew Goldfields may offer. Each time that we or St Andrew Goldfields sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement also
may
add, update or change information contained in this prospectus. You should
read
both this prospectus and any prospectus supplement together with additional
information incorporated by reference in this prospectus before making an
investment in our securities. See “Where You Can Find More Information” for more
information. We or St Andrew Goldfields may use this prospectus to sell
securities only if it is accompanied by a prospectus supplement.
The
registration statement of which this prospectus is a part, including the
exhibits to the registration statement, contains additional information about
us
and the securities offered under this prospectus. That registration statement
can be read at the SEC’s website, located at http://www.sec.gov, or at the SEC’s
offices referenced under the heading “Where You Can Find More
Information.”
You
should not assume that the information in this prospectus, any accompanying
prospectus supplement or any document incorporated by reference is accurate
as
of any date other than the date on its front cover.
WHERE
YOU CAN FIND MORE INFORMATION
We
are
subject to the reporting requirements of the Securities Exchange Act of 1934,
as
amended (which we sometimes refer to in this prospectus as the “Exchange Act”),
and file annual, quarterly and periodic reports, proxy statements and other
information with the Unites States Securities and Exchange Commission (which
we
sometimes refer to in this prospectus as 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 450 Fifth
Street, N.W., 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.
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
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, 2007;
|
| |
2.
|
Our
Current Report on Form 8-K filed with the SEC on March 31, 2008;
and
|
| |
3.
|
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 that 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, 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 expenditure, and exploration and development efforts. Words
such
as “anticipates,” “expects,” “intends,” and similar expressions identify
forward-looking statements. These statements include comments regarding:
| |
·
|
future
timing and operational results and cash flows from the Montana Tunnels
mine;
|
| |
·
|
the
establishment and estimates of mineral reserves and
resources;
|
| |
·
|
the
timing of completion of a Black Fox feasibility
study;
|
| |
·
|
production
and production costs;
|
| |
·
|
daily
production and mill throughput
rates;
|
| |
·
|
grade
of ore mined and milled;
|
| |
·
|
grade
of concentrates produced;
|
| |
·
|
anticipated
expenditures for development, exploration, and corporate
overhead;
|
| |
·
|
timing
and issue of permits;
|
| |
·
|
expansion
plans for existing properties;
|
| |
·
|
plans
for Black Fox and Huizopa, including
drilling;
|
| |
·
|
estimates
of closure costs;
|
| |
·
|
future
financing of projects at Apollo;
|
| |
·
|
estimates
of environmental liabilities;
|
| |
·
|
our
ability to obtain financing to fund our estimated expenditure and
capital
requirements;
|
| |
·
|
factors
impacting our results of operations;
and
|
| |
·
|
the
impact of adoption of new accounting
standards.
|
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:
| |
·
|
unexpected
changes in business and economic
conditions;
|
| |
·
|
significant
increases or decreases in gold prices and zinc prices;
|
| |
·
|
changes
in interest and currency exchange
rates;
|
| |
·
|
timing
and amount of production;
|
| |
·
|
unanticipated
grade changes;
|
| |
·
|
unanticipated
recovery or production problems;
|
| |
·
|
operational
problems at our mining property;
|
| |
·
|
metallurgy,
processing, access, availability of materials, equipment, supplies
and
water;
|
| |
·
|
determination
of reserves;
|
| |
·
|
changes
in project parameters;
|
| |
·
|
costs
and timing of development of new reserves;
|
| |
·
|
results
of current and future exploration activities;
|
| |
·
|
results
of pending and 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 this prospectus under the heading “Risk
Factors.”
|
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,
in an accompanying prospectus supplement and in any documents incorporated
by
reference into this prospectus and the accompanying prospectus supplement.
We
undertake no obligation to update forward-looking statements.
APOLLO
GOLD COROPORATION
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 by-product metals, as well as related activities including
exploration and development. The Company is the operator of the Montana Tunnels
mine, which is a 50% joint venture with Elkhorn Tunnels, LLC. The Mine is an
open pit mine and mill producing gold doré and lead-gold and zinc-gold
concentrates.
Apollo
has a development project, 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 concessions at the Huizopa exploration project,
located in the Sierra Madres in Chihuahua, Mexico. The Huizopa project is
subject to an 80% Apollo/20% Mineras Coronado joint venture
agreement.
RISK
FACTORS
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 historic
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 a history of losses.
With
the
exception of the most recent fiscal year during which we had a net income of
$2,416,000, we have incurred significant losses. Our net losses were $15,587,000
and $22,208,000 for the years ended December 31, 2006 and 2005, respectively.
There can be no assurance that we will achieve or sustain profitability in
the
future.
We
have experienced operational problems at our Montana Tunnels
mine.
Since
the
sale of our Florida Canyon and Standard mines in November 2005, all of our
revenues have been derived from our milling operations at the Montana Tunnels
mine, which is a low grade mine. Historically, the Montana Tunnels mine has
been
unprofitable. 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. Throughout 2005, we experienced operational problems,
particularly in the open pit, leading to the suspension of mining on October
21,
2005 for safety reasons due to increased wall activity in the open pit. After
the suspension of mining and until May 12, 2006, we were able to continue to
produce gold doré, lead-gold and zinc-gold concentrates from milling low grade
stockpiled ore. However, on May 12, 2006, all operations ceased at the mine
and
it was placed on care and maintenance. On July 28, 2006, we entered into a
joint
venture agreement with Elkhorn Tunnels, LLC, in respect of the Montana Tunnels
mine pursuant to which Elkhorn Tunnels made financial contributions in exchange
for a fifty percent interest in the mine. Mill operations recommenced in March
2007, however there can be no assurances that we will not encounter additional
operational problems at our Montana Tunnels mine.
Our
earnings may be affected by metals price volatility, specifically the volatility
of gold and zinc prices.
We
historically have derived all of our revenues from the sale of gold, silver,
lead and zinc, and our development and exploration activities are focused on
gold. As a result, our future earnings are directly related to the price of
gold. 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;
|
| |
·
|
central
bank lending, sales and purchases of
gold;
|
| |
·
|
forward
sales of gold by producers and
speculators;
|
| |
·
|
production
and cost levels in major gold-producing regions;
and
|
| |
·
|
rapid
short-term changes in supply and demand because of speculative or
hedging
activities.
|
Gold
prices are also affected by macroeconomic factors, including:
| |
·
|
confidence
in the global monetary system;
|
| |
·
|
expectations
of the future rate of inflation (if
any);
|
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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;
|
| |
·
|
global
or regional political or economic events, including but not limited
to
acts of terrorism.
|
The
current demand for, and supply of, gold also affects gold prices. The supply
of
gold consists of a combination of new production from mining and existing stock
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.
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.
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.
We
do not
currently have sufficient funds to complete all of our planned development
activities at Black Fox and our planned exploration activities at Huizopa or
to
develop a mine at Black Fox. The development of Black Fox and exploration of
Huizopa will require significant capital expenditures. Sources of external
financing may include bank and non-bank 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.
Substantially
all of our assets are pledged to secure our indebtedness.
Substantially
all of the Montana Tunnels assets and our Black Fox property are pledged to
secure indebtedness outstanding under the Facility Agreement, dated October
12,
2007, by and among Montana Tunnels Mining, Inc., Apollo, Apollo Gold, Inc.,
a
wholly owned subsidiary of Apollo, RMB Australia Holdings Limited and RMB
Resources Inc. Since these assets represent substantially all of our assets,
we
will not have access to additional secured lending until this indebtedness
is
repaid, which may require us to raise additional funds through unsecured debt
and equity offerings. Default under our debt obligations would entitle our
lenders to foreclose on our assets. The inability to raise additional working
capital or the foreclosure of our assets could have a material adverse effect
on
our financial condition and results of operations.
Our
Huizopa exploration project is subject to political and regulatory
uncertainty.
Our
Huizopa exploration project is located in the northern part of the Sierra Madres
in the State of Chihuahua, Mexico. There are numerous risks inherent in
conducting business in Mexico, including political and economic instability,
exposure to currency fluctuations, greater difficulties in accounts receivable
collection, difficulties in staffing and managing operations and potentially
adverse tax consequences. In addition, our ability to explore and develop our
Huizopa exploration project is subject to maintaining satisfactory relations
with the Ejido Huizopa, which is a group of local inhabitants who under Mexican
law are granted rights to conduct agricultural activities and control surface
access on the property. In 2006, we entered into an agreement with the Ejido
Huizopa pursuant to which we agreed to make annual payments to the Ejido Huizopa
in exchange for the right to use the land covering our mining concessions for
all activities necessary for the exploration, development and production of
potential ore deposits. There can be no assurances that the Ejido Huizopa will
continue to honor the agreement. If we are unable to successfully manage our
operations in Mexico or maintain satisfactory relations with the Ejido Huizopa,
our development of the Huizopa property could be hindered or terminated and,
as
a result, our business and financial condition could be adversely
affected.
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, and lead to a reduction in reserves.
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, including difficulty in obtaining financing
and a decrease in our stock price. 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.
We
prepare estimates of future production for our operations. We develop 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 not yet in
production and to the Montana Tunnels mine expansion. 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 and expansion 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.
We
are
engaged 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 Black
Fox property that we are developing will be profitable.
Mineral
exploration in general, and gold exploration in particular, is speculative
and
is 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
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.
The
market price of our common shares could experience volatility and could decline
significantly.
Our
common shares are listed on the American Stock Exchange and the Toronto Stock
Exchange. Our share price has declined significantly since 2004, and in 2007
the
price of our common shares fluctuated from a low of $0.36 per share to a high
of
$0.78 per share. 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 and zinc 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.
The
existence of outstanding rights to purchase common shares may impair our share
price and our ability to raise capital.
As
of
April 14, 2008, approximately 36.6 million of our common shares are issuable
on
exercise of warrants, options or other rights to purchase common shares at
prices ranging from $0.20 to $2.24. In addition, there are approximately 15.3
million common shares issuable upon the conversion of the $7.7 million
outstanding principal amount of convertible debentures issued February 23,
2007
at the option of the holder at a conversion price of $0.50 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 equity 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.
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
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 our rights to mine on any of our properties
are
in doubt, title to mining properties are subject to potential claims by third
parties. In September 2006, five of our claims associated with our Black Fox
Project were listed as reopened for staking on the Ministry of Northern
Development and Mines (MNDM) website. These claims totaling 185 acres were
immediately staked by local prospectors. None of our reserves are located on
these claims. Four of these overstaked claims have since been returned to us.
We
are negotiating with the overstaker with respect to the remaining claim;
however, no guarantee can be made that such negotiations will be successful.
It
is our opinion that these claims were erroneously listed as open. We are working
diligently to resolve this matter.
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, 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.
We
face substantial governmental regulation.
Safety.
Our
U.S. mining operation is 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 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 bonds in
accordance with regulatory determinations is a condition to the right to operate
under all material operating permits, and therefore increases in bonding
requirements could prevent our operations from continuing even if we were in
full compliance with all substantive environmental laws.
We
face strong competition from other mining companies for the acquisition of
new
properties.
Mines
have limited lives and as a result, we may seek to replace and expand our
reserves through the acquisition of new properties. In addition, there is a
limited supply of desirable mineral lands available in the United States, 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, most of which have greater financial resources
than
we do, we may be unable to acquire attractive new mining
properties.
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 Chief Financial Officer and
Senior Vice President-Finance and Corporate Development. 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 such officers. We
currently do not carry key person insurance on any of these individuals, and
the
loss of one or more of them could have a material adverse effect on our
operations.
There
may be certain tax risks associated with investments in our
company.
Potential
investors that are U.S. taxpayers should consider that we could be considered
to
be a “passive foreign investment company” (a “PFIC”) for U.S. federal income tax
purposes. Although we believe that we currently are not a PFIC, the tests for
determining PFIC status are dependent upon a number of factors, some of which
are beyond our ability to predict or control, and we can not assure you that
we
are not currently a PFIC or that will not become a PFIC in the future. If we
are
or become a PFIC, a U.S. taxpayer who disposes of (or is deemed to dispose
of)
our common shares at a gain or who receives a so-called “excess distribution” on
our common shares generally would be subject to a special adverse tax regime.
Such gains and excess distributions would be allocated ratably to the U.S.
taxpayer’s holding period. The portion of any such gains and excess
distributions allocated to the current year would be includible as ordinary
income in the current year. Prior years’ allocations would be taxed at the
highest marginal rate applicable to ordinary income for each such year and
would
be subject to interest charges to reflect the value of the U.S. income tax
deferral. Additional special adverse rules also apply to investors who are
U.S.
taxpayers who own our common shares if we are a PFIC and have a non-U.S.
subsidiary that is also a PFIC. Special estate tax rules could be applicable
to
our common shares if we are a PFIC.
Possible
hedging activities could expose us to losses.
In
connection with our $8.0 million borrowing with RMB Australia Holdings Limited
in October 2007, we were required to enter into hedges of approximately 65%
and
40%, respectively, of our share of lead and zinc production from the Montana
Tunnels mine during the 12 months following the date of the borrowing. 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.
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.
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 remediating 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. While our principal executive officer
is
located in the United States, many of our assets are located outside of the
United States. Additionally, a number of our directors are residents of Canada.
It might not be possible for investors in the United States to collect judgments
obtained in United States courts predicated on the civil liability provisions
of
U.S. 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. Execution by United States courts of any judgment obtained
against us, or any of the directors, executive officers or experts identified
in
this prospectus or documents incorporated by reference herein, 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.
RATIO
OF EARNINGS TO FIXED CHARGES
The
ratios of our earnings to fixed charges for the periods indicated are as
follows:
| |
|
Year
Ended December 31,
|
|
| |
|
2007
|
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
|
Ratio
of Earnings to Fixed Charges
|
|
|
1.2x
|
|
|
—(1)
|
|
|
—(1)
|
|
|
—(1)
|
|
|
—(1)
|
|
(1)
Our
earnings were insufficient to cover fixed charges by the following amounts
for
the years ended December 31,
|
2006
|
|
2005
|
|
2004
|
|
2003
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,560,000
|
|
$
|
13,428,000
|
|
$
|
27,043,000
|
|
$
|
15,585,000
|
|
The
computation of earnings to fixed charges is based on the applicable amounts
for
us and our subsidiaries on a consolidated basis. For purposes of computing
these
ratios, earnings consist of operating income before income taxes plus fixed
charges. Fixed charges consist of interest charges which include accretion
on
convertible debentures.
USE
OF PROCEEDS
Unless
otherwise indicated in the applicable prospectus supplement, we intend to use
the net proceeds from the sale of the securities offered under this prospectus
for the exploration and development of our properties, acquisition, exploration
and development of additional properties or interests, working capital and
general corporate purposes.
Pending
the application of the net proceeds, we expect to invest the proceeds in
short-term, investment-grade, interest-bearing instruments, or other
investment-grade securities.
The
selling shareholder will receive all of the proceeds from the sales of the
shares of common shares offered by it. We will not receive any proceeds from
the
sales of the common shares by the selling shareholder.
DESCRIPTION
OF DEBT SECURITIES
We
may
issue debt securities from time to time in one or more series. The following
description summarizes the general terms of the debt securities that we may
offer pursuant to this prospectus that are common to all series. The particular
terms of any series of our debt securities will be described in the prospectus
supplement relating to those debt securities. We urge you to read the applicable
prospectus supplement for the terms of the series of debt securities offered
because the terms of specific series of debt securities may differ from the
general information that we have provided below.
We
conduct substantially our operations in the United States and Mexico through
subsidiaries. As a result, claims of the holders of the debt securities will
generally have a junior position to claims of creditors of our subsidiaries,
except to the extent that we may be recognized as a creditor of those
subsidiaries. Claims of creditors of our subsidiaries other than us may include
substantial amounts of long-term debt, commercial paper and other short-term
borrowings.
As
required by federal law for all bonds and notes of companies that are publicly
offered, the debt securities will be governed by a document called an
“indenture.” An indenture is a contract between a financial institution, acting
on your behalf as trustee of the debt securities offered, and us. The debt
securities will be issued pursuant to an indenture that we will enter into
with
a trustee, which we will select. When we refer to the “indenture” in this
prospectus, we are referring to the indenture under which your debt securities
are issued, as may be supplemented by any supplemental indenture applicable
to
your debt securities. The trustee has two main roles. First, subject to some
limitations on the extent to which the trustee can act on your behalf, the
trustee can enforce your rights against us if we default on our obligations
under the indenture. Second, the trustee performs certain administrative duties
for us with respect to the debt securities.
A
prospectus supplement will describe the specific terms of any particular series
of debt securities, including any of the terms in this section that will not
apply to that series, and any special considerations, including tax
considerations, applicable to those debt securities. The prospectus supplement
relating to each series of debt securities that we offer using this prospectus
will be attached to the front of this prospectus. In some instances, certain
of
the precise terms of debt securities you are offered may be described in a
further prospectus supplement. If information in a prospectus supplement is
inconsistent with the information in this prospectus, then the information
in
the prospectus supplement will apply and, where applicable, supersede the
information in this prospectus.
The
following section is a summary of the principal terms and provisions that will
be included in the indenture, unless otherwise provided in any applicable
prospectus supplement. Because this section is a summary, it does not describe
every aspect of the debt securities or the indenture. We urge you to read the
indenture and any supplement thereto that are applicable to you. The form of
indenture is filed as an exhibit to the registration statement of which this
prospectus is a part. See “Where You Can Find More Information” for information
on how to obtain a copy of the indenture.
General
The
senior debt securities will have the same ranking as all of our other unsecured
and unsubordinated debt. The subordinated debt securities will be unsecured
and
will be subordinated and junior to all senior indebtedness.
The
debt
securities may be issued in one or more separate series of senior debt
securities and/or subordinated debt securities. The prospectus supplement
relating to the particular series of debt securities being offered will specify
the particular amounts, prices and terms of those debt securities. These terms
may include:
| |
·
|
the
title of the debt securities;
|
| |
·
|
any
limit upon the aggregate principal amount of the debt
securities;
|
| |
·
|
the
date or dates, or the method of determining the dates, on which the
debt
securities will mature;
|
| |
·
|
the
interest rate or rates of the debt securities, or the method of
determining those rates, the interest payment dates and, for registered
debt securities, the regular record
dates;
|
| |
·
|
if
a debt security is issued with original issue discount, the yield
to
maturity;
|
| |
·
|
the
places where payments may be made on the debt
securities;
|
| |
·
|
any
mandatory or optional redemption provisions applicable to the debt
securities;
|
| |
·
|
any
sinking fund or analogous provisions applicable to the debt
securities;
|
| |
·
|
any
conversion or exchange provisions applicable to the debt
securities;
|
| |
·
|
any
terms for the attachment to the debt securities of warrants, options
or
other rights to purchase or sell our
securities;
|
| |
·
|
the
portion of the principal amount of the debt security payable upon
the
acceleration of maturity if other than the entire principal amount
of the
debt securities;
|
| |
·
|
any
deletions of, or changes or additions to, the events of default or
covenants applicable to the debt
securities;
|
| |
·
|
if
other than U.S. dollars, the currency or currencies in which payments
of
principal, premium and/or interest on the debt securities will be
payable
and whether the holder may elect payment to be made in a different
currency;
|
| |
·
|
the
method of determining the amount of any payments on the debt securities
which are linked to an index;
|
| |
·
|
whether
the debt securities will be issued in fully registered form without
coupons or in bearer form, with or without coupons, or any combination
of
these, and whether they will be issued in the form of one or more
global
securities in temporary or definitive
form;
|
| |
·
|
any
terms relating to the delivery of the debt securities if they are
to be
issued upon the exercise of
warrants;
|
| |
·
|
whether
and on what terms we will pay additional amounts to holders of the
debt
securities that are not U.S. persons in respect of any tax, assessment
or
governmental charge withheld or deducted and, if so, whether and
on what
terms we will have the option to redeem the debt securities rather
than
pay the additional amounts; and
|
| |
·
|
any
other specific terms of the debt
securities.
|
Unless
otherwise specified in the applicable prospectus supplement, (1) the debt
securities will be registered debt securities and (2) debt securities
denominated in U.S. dollars will be issued, in the case of registered debt
securities, in denominations of $1,000 or an integral multiple of $1,000 and,
in
the case of bearer debt securities, in denominations of $5,000. Debt securities
may bear legends required by U.S. federal tax law and regulations.
If
any of
the debt securities are sold for any foreign currency or currency unit or if
any
payments on the debt securities are payable in any foreign currency or currency
unit, the prospectus supplement will contain any restrictions, elections, tax
consequences, specific terms and other information with respect to the debt
securities and the foreign currency or currency unit.
Exchange,
Registration and Transfer
Debt
securities may be transferred or exchanged at the corporate trust office of
the
security registrar or at any other office or agency maintained by us for these
purposes, without the payment of any service charge, except for any tax or
governmental charges. The senior trustee initially will be the designated
security registrar in the United States for the senior debt securities. The
subordinated trustee initially will be the designated security registrar in
the
United States for the subordinated debt securities.
If
debt
securities are issuable as both registered debt securities and bearer debt
securities, the bearer debt securities will be exchangeable for registered
debt
securities. Except as provided below, bearer debt securities will have
outstanding coupons. If a bearer debt security with related coupons is
surrendered in exchange for a registered debt security between a record date
and
the date set for the payment of interest, the bearer debt security will be
surrendered without the coupon relating to that interest payment and that
payment will be made only to the holder of the coupon when due.
In
the
event of any redemption in part of any class or series of debt securities,
we
will not be required to:
| |
·
|
issue,
register the transfer of, or exchange, debt securities of any series
between the opening of business 15 days before any selection of debt
securities of that series to be redeemed and the close of business:
|
| |
·
|
if
debt securities of the series are issuable only as registered debt
securities, the day of mailing of the relevant notice of redemption,
and
|
| |
·
|
if
debt securities of the series are issuable as bearer debt securities,
the
day of the first publication of the relevant notice of redemption
or, if
debt securities of the series are also issuable as registered debt
securities and there is no publication, the day of mailing of the
relevant
notice of redemption;
|
| |
·
|
register
the transfer, or exchange, of any registered debt security selected
for
redemption, in whole or in part, except the unredeemed portion of
any
registered debt security being redeemed in part;
or
|
| |
·
|
exchange
any bearer debt security selected for redemption, except to exchange
it
for a registered debt security which is simultaneously surrendered
for
redemption.
|
Payment
and Paying Agent
We
will
pay principal, interest and any premium on fully registered securities in the
designated currency or currency unit at the office of a designated paying agent.
Payment of interest on fully registered securities may be made at our option
by
check mailed to the persons in whose names the debt securities are registered
on
days specified in the indentures or any prospectus supplement.
We
will
pay principal, interest and any premium on bearer securities in the designated
currency or currency unit at the office of a designated paying agent or agents
outside of the United States. Payments will be made at the offices of the paying
agent in the United States only if the designated currency is U.S. dollars
and
payment outside of the United States is illegal or effectively precluded. If
any
amount payable on any debt security or coupon remains unclaimed at the end
of
two years after that amount became due and payable, the paying agent will
release any unclaimed amounts to us, and the holder of the debt security or
coupon will look only to us for payment.
Global
Securities
A
global
security represents one or any other number of individual debt securities.
Generally all debt securities represented by the same global securities will
have the same terms. Each debt security issued in book-entry form will be
represented by a global security that we deposit with and register in the name
of a financial institution or its nominee that we select. The financial
institution that we select for this purpose is called the depositary. Unless
we
specify otherwise in the applicable prospectus supplement, The Depositary Trust
Company, New York, New York, known as DTC, will be the depositary for all debt
securities that are issued in book-entry form.
A
global
security may not be transferred to or registered in the name of anyone other
than the depositary or its nominee, unless special termination situations arise.
As a result of these arrangements, the depositary, or its nominee, will be
the
sole registered holder of all debt securities represented by a global security,
and investors will be permitted to own only beneficial interests in a global
security. Beneficial interests must be held by means of an account with a
broker, bank or other financial institution that in turn has an account either
with the depositary or with another institution that has an account with the
depositary. Thus, an investor whose security is represented by a global security
will not be registered holder of the debt security, but an indirect holder
of a
beneficial interest in the global security.
Temporary
Global Securities
All
or
any portion of the debt securities of a series that are issuable as bearer
debt
securities initially may be represented by one or more temporary global debt
securities, without interest coupons, to be deposited with the depositary for
credit to the accounts of the beneficial owners of the debt securities or to
other accounts as they may direct. On and after an exchange date provided in
the
applicable prospectus supplement, each temporary global debt security will
be
exchangeable for definitive debt securities in bearer form, registered form,
definitive global bearer form or any combination of these forms, as specified
in
the prospectus supplement. No bearer debt security delivered in exchange for
a
portion of a temporary global debt security will be mailed or delivered to
any
location in the United States.
Interest
on a temporary global debt security will be paid to the depositary with respect
to the portion held for its account only after they deliver to the trustee
a
certificate which states that the portion:
| |
· |
is
not beneficially owned by a United States
person; |
| |
·
|
has
not been acquired by or on behalf of a United States person or for
offer
to resell or for resale to a United States person or any person inside
the
United States; or
|
| |
·
|
if
a beneficial interest has been acquired by a United States person,
that
the person is a financial institution, as defined in the Internal
Revenue
Code, purchasing for its own account or has acquired the debt security
through a financial institution and that the debt securities are
held by a
financial institution that has agreed in writing to comply with the
requirements of Section 165(j)(3)(A), (B) or (C) of the Internal
Revenue
Code and the regulations to the Internal Revenue Code and that it
did not
purchase for resale inside the United States.
|
The
certificate must be based on statements provided by the beneficial owners of
interests in the temporary global debt security. The depositary will credit
the
interest received by it to the accounts of the beneficial owners of the debt
security or to other accounts as they may direct.
“United
States person” means a citizen or resident of the United States, a corporation,
partnership or other entity created or organized in or under the laws of the
United States or an estate or trust with income subject to United States federal
income taxation regardless of its source.
Definitive
Global Securities
Bearer
Securities.
The
applicable prospectus supplement will describe the exchange provisions, if
any,
of debt securities issuable in definitive global bearer form. We will not
deliver any bearer debt securities delivered in exchange for a portion of a
definitive global debt security to any location in the United States.
U.S.
Book-Entry Securities.
Debt
securities of a series represented by a definitive global registered debt
security and deposited with or on behalf of a depositary in the United States
will be represented by a definitive global debt security registered in the
name
of the depositary or its nominee. Upon the issuance of a global debt security
and the deposit of the global debt security with the depositary, the depositary
will credit, on its book-entry registration and transfer system, the respective
principal amounts represented by that global debt security to the accounts
of
participating institutions that have accounts with the depositary or its
nominee. The accounts to be credited shall be designated by the underwriters
or
agents for the sale of U.S. book-entry debt securities or by our company, if
these debt securities are offered and sold directly by our company.
Ownership
of U.S. book-entry debt securities will be limited to participants or persons
that may hold interests through participants. In addition, ownership of U.S.
book-entry debt securities will be evidenced only by, and the transfer of that
ownership will be effected only through, records maintained by the depositary
or
its nominee for the definitive global debt security or by participants or
persons that hold through participants.
So
long
as the depositary or its nominee is the registered owner of a global debt
security, that depositary or nominee, as the case may be, will be considered
the
sole owner or holder of the U.S. book-entry debt securities represented by
that
global debt security for all purposes under the indenture. Payment of principal
of, and premium and interest, if any, on, U.S. book-entry debt securities will
be made to the depositary or its nominee as the registered owner or the holder
of the global debt security representing the U.S. book-entry debt securities.
Owners of U.S. book-entry debt securities:
| |
·
|
will
not be entitled to have the debt securities registered in their
names; |
| |
·
|
will
not be entitled to receive physical delivery of the debt securities
in
definitive form; and
|
| |
·
|
will
not be considered the owners or holders of the debt securities under
the
indenture. |
The
laws
of some jurisdictions require that purchasers of securities take physical
delivery of securities in definitive form. These laws impair the ability to
purchase or transfer U.S. book-entry debt securities.
We
expect
that the depositary for U.S. book-entry debt securities of a series, upon
receipt of any payment of principal of, or premium or interest, if any, on,
the
related definitive global debt security, will immediately credit participants’
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the global debt security as shown on the
records of the depositary. We also expect that payments by participants to
owners of beneficial interests in a global debt security held through those
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers in bearer
form or registered in “street name,” and will be the responsibility of those
participants.
Covenants
of the Company
We
may,
without the consent of the holders of the debt securities, merge into or
consolidate with any other person, or convey or transfer all or substantially
all of our company’s properties and assets to another person provided
that:
| |
·
|
the
successor assumes on the same terms and conditions all the obligations
under the debt securities and the indentures;
and
|
| |
·
|
immediately
after giving effect to the transaction, there is no default under
the
applicable indenture.
|
The
remaining or acquiring person will be substituted for our company in the
indentures with the same effect as if it had been an original party to the
indenture. A prospectus supplement will describe any other limitations on
the
ability of our company to merge into, consolidate with, or convey or transfer
all or substantially all or our properties and assets to, another person.
Satisfaction
and Discharge; Defeasance
We
may be
discharged from our obligations on the debt securities of any class or series
that have matured or will mature or be redeemed within one year if we deposit
with the trustee enough cash and/or U.S. government obligations or foreign
government securities, as the case may be, to pay all the principal, interest
and any premium due to the stated maturity or redemption date of the debt
securities and comply with the other conditions set forth in the applicable
indenture. The principal conditions that we must satisfy to discharge our
obligations on any debt securities are (1) pay all other sums payable with
respect to the applicable series of debt securities and (2) deliver to the
trustee an officers’ certificate and an opinion of counsel which state that the
required conditions have been satisfied.
Each
indenture contains a provision that permits our company to elect to be
discharged from all of our obligations with respect to any class or series
of
debt securities then outstanding. However, even if we effect a legal defeasance,
some of our obligations will continue, including obligations to:
|
|
· |
maintain
and apply money in the defeasance
trust;
|
|
|
· |
register
the transfer or exchange of the debt
securities;
|
|
|
· |
replace
mutilated, destroyed, lost or stolen debt securities;
and
|
|
|
· |
maintain
a registrar and paying agent in respect of the debt
securities.
|
Each
indenture also permits our company to elect to be released from our obligations
under specified covenants and from the consequences of an event of default
resulting from a breach of those covenants. To make either of the above
elections, we must deposit in trust with the trustee cash and/or U.S. government
obligations, if the debt securities are denominated in U.S. dollars, and/or
foreign government securities if the debt securities are denominated in a
foreign currency, which through the payment of principal and interest under
their terms will provide sufficient amounts, without reinvestment, to repay
in
full those debt securities. As a condition to legal defeasance or covenant
defeasance, we must deliver to the trustee an opinion of counsel that the
holders of the debt securities will not recognize income, gain or loss for
U.S.
federal income tax purposes as a result of the deposit and defeasance and
will
be subject to U.S. federal income tax in the same amount and in the same
manner
and times as would have been the case if the deposit and defeasance had not
occurred. In the case of a legal defeasance only, the opinion of counsel
must be
based on a ruling of the U.S. Internal Revenue Service or other change in
applicable U.S. federal income tax law.
The
indentures specify the types of U.S. government obligations and foreign
government securities that we may deposit.
Events
of Default, Notice and Waiver
Each
indenture defines an event of default with respect to any class or series of
debt securities as one or more of the following events:
|
|
· |
failure
to pay interest on any debt security of the class or series for 30
days
when due;
|
| |
·
|
failure
to pay the principal or any premium on any debt securities of the
class or
series when due;
|
| |
·
|
failure
to make any sinking fund payment for 30 days when
due;
|
| |
·
|
failure
to perform any other covenant in the debt securities of the series
or in
the applicable indenture with respect to debt securities of the series
for
90 days after being given notice; and
|
| |
·
|
occurrence
of an event of bankruptcy, insolvency or reorganization set forth
in the
indenture.
|
An
event
of default for a particular class or series of debt securities does not
necessarily constitute an event of default for any other class or series of
debt
securities issued under an indenture.
In
the
case of an event of default arising from events of bankruptcy or insolvency
set
forth in the indenture, all outstanding debt securities will become due and
payable immediately without further action or notice. If any other event of
default as to a series of debt securities occurs and is continuing, the trustee
or the holders of at least 25% in principal amount of the then outstanding
debt
securities of that series may declare all the debt securities to be due and
payable immediately.
The
holders of a majority in aggregate principal amount of the debt securities
then
outstanding by notice to the trustee may on behalf of the holders of all of
the
debt securities of that series waive any existing default or event of default
and its consequences under the applicable indenture except a continuing default
or event of default in the payment of interest on, or the principal of, the
debt
securities of that series.
Each
indenture requires the trustee to, within 90 days after the occurrence of a
default known to it with respect to any outstanding series of debt securities,
give the holders of that class or series notice of the default if uncured or
not
waived. However, the trustee may withhold this notice if it determines in good
faith that the withholding of this notice is in the interest of those holders,
except that the trustee may not withhold this notice in the case of a payment
default. The term “default” for the purpose of this provision means any event
that is, or after notice or lapse of time or both would become, an event of
default with respect to debt securities of that series.
Other
than the duty to act with the required standard of care during an event of
default, a trustee is not obligated to exercise any of its rights or powers
under the applicable indenture at the request or direction of any of the holders
of debt securities, unless the holders have offered to the trustee reasonable
security and indemnity. Each indenture provides that the holders of a majority
in principal amount of outstanding debt securities of any series may direct
the
time, method and place of conducting any proceeding for any remedy available
to
the trustee, or exercising any trust or other power conferred on the trustee
if
the direction would not conflict with any rule of law or with the indenture.
However, the trustee may take any other action that it deems proper which is
not
inconsistent with any direction and may decline to follow any direction if
it in
good faith determines that the directed action would involve it in personal
liability.
Each
indenture includes a covenant that we will file annually with the trustee a
certificate of no default, or specifying any default that exists.
Modification
of the Indentures
We
and
the applicable trustee may modify an indenture without the consent of the
holders for limited purposes, including adding to our covenants or events of
default, establishing forms or terms of debt securities, curing ambiguities
and
other purposes which do not adversely affect the holders in any material
respect.
We
and
the applicable trustee may make modifications and amendments to an indenture
with the consent of the holders of a majority in principal amount of the
outstanding debt securities of all affected series. However, without the consent
of each affected holder, no modification may:
|
|
· |
change
the stated maturity of any debt
security;
|
|
|
· |
reduce
the principal, premium, if any, or rate of interest on any debt
security;
|
|
|
· |
change
any place of payment or the currency in which any debt security is
payable;
|
|
|
· |
impair
the right to enforce any payment after the stated maturity or redemption
date;
|
|
|
· |
adversely
affect the terms of any conversion
right;
|
| |
·
|
reduce
the percentage of holders of outstanding debt securities of any series
required to consent to any modification, amendment or waiver under
the
indenture;
|
| |
·
|
change
any of our obligations, with respect to outstanding debt securities
of a
series, to maintain an office or agency in the places and for the
purposes
specified in the indenture for the series;
or
|
| |
·
|
change
the provisions in the indenture that relate to its modification or
amendment other than to increase the percentage of outstanding debt
securities of any series required to consent to any modification
or waiver
under the indenture.
|
Meetings
The
indentures contain provisions for convening meetings of the holders of debt
securities of a series. A meeting may be called at any time by the trustee
and
also, upon request, by our company or the holders of at least 25% in principal
amount of the outstanding debt securities of a series, in any case upon notice
given in accordance with “Notices” below. Persons holding a majority in
principal amount of the outstanding debt securities of a series will constitute
a quorum at a meeting. A meeting called by our company or the trustee that
does
not have a quorum may be adjourned for not less than 10 days. If there is not
a
quorum at the adjourned meeting, the meeting may be further adjourned for not
less than 10 days. Any resolution presented at a meeting at which a quorum
is
present may be adopted by the affirmative vote of the holders of a majority
in
principal amount of the outstanding debt securities of that series, except
for
any consent which must be given by the holders of each debt security affected
by
the modifications or amendments of an indenture described above under
“Modification of the Indentures.” However, a resolution with respect to any
request, demand, authorization, direction, notice, consent, waiver, or other
action which may be made, given, or taken by the holders of a specified
percentage, which is equal to or less than a majority, in principal amount
of
outstanding debt securities of a series may be adopted at a meeting at which
a
quorum is present by the affirmative vote of the holders of the specified
percentage in principal amount of the outstanding debt securities of that
series. Any resolution passed or decision taken at any meeting of holders of
debt securities of any series duly held in accordance with an indenture will
be
binding on all holders of debt securities of that series and the related
coupons. The indentures provide that specified consents, waivers and other
actions may be given by the holders of a specified percentage of outstanding
debt securities of all series affected by the modification or amendment, acting
as one class. For purposes of these consents, waivers and actions, only the
principal amount of outstanding debt securities of any series represented at
a
meeting at which a quorum is present and voting in favor of the action will
be
counted for purposes of calculating the aggregate principal amount of
outstanding debt securities of all series affected by the modification or
amendment favoring the action.
Notices
In
most
instances, notices to holders of bearer debt securities will be given by
publication at least once in a daily newspaper in New York, New York and in
London, England and in other cities as may be specified in the bearer debt
securities and will be mailed to those persons whose names and addresses were
previously filed with the applicable trustee, within the time prescribed for
the
giving of the notice. Notice to holders of registered debt securities will
be
given by mail to the addresses of those holders as they appear in the security
register.
Title
Title
to
any bearer debt securities and any related coupons will pass by delivery. We,
the trustee, and any agent of ours or the trustee may treat the holder of any
bearer debt security or related coupon and, prior to due presentment for
registration of transfer, the registered owner of any registered debt security
as the absolute owner of that debt security for the purpose of making payment
and for all other purposes, regardless of whether or not that debt security
or
coupon shall be overdue and notwithstanding any notice to the
contrary.
Replacement
of Securities Coupons
Debt
securities or coupons that have been mutilated will be replaced by our company
at the expense of the holder upon surrender of the mutilated debt security
or
coupon to the security registrar. Debt securities or coupons that become
destroyed, stolen, or lost will be replaced by our company at the expense of
the
holder upon delivery to the security registrar of evidence of its destruction,
loss, or theft satisfactory to our company and the security registrar. In the
case of a destroyed, lost, or stolen debt security or coupon, the holder of
the
debt security or coupon may be required to provide reasonable security or
indemnity to the trustee and our company before a replacement debt security
will
be issued.
Governing
Law
The
indentures, the debt securities, and the coupons will be governed by, and
construed under, the laws of the State of New York without regard to the
principles of conflicts of laws.
Concerning
the Trustees
We
may
from time to time maintain lines of credit, and have other customary banking
relationships, with any of the trustees.
Senior
Debt Securities
The
senior debt securities will rank equally with all of our company’s other
unsecured and non-subordinated debt.
Certain
Covenants in the Senior Indenture
The
prospectus supplement relating to a series of senior debt securities will
describe any material covenants in respect of that series of senior debt
securities.
Subordinated
Debt Securities
The
subordinated debt securities will be unsecured. The subordinated debt securities
will be subordinate in right of payment to all senior indebtedness. In addition,
claims of creditors and preferred shareholders of our subsidiaries generally
will have priority with respect to the assets and earnings of our subsidiaries
over the claims of our creditors, including holders of the subordinated debt
securities, even though those obligations may not constitute senior
indebtedness. The subordinated debt securities, therefore, will be effectively
subordinated to creditors, including trade creditors, and preferred shareholders
of our subsidiaries, if any, with regard to the assets of our subsidiaries.
Creditors of our subsidiaries include trade creditors, secured creditors and
creditors holding guarantees issued by our subsidiaries.
Unless
otherwise specified in a prospectus supplement, senior indebtedness shall mean
the principal of, premium, if any, and interest on, all indebtedness for money
borrowed by our company and any deferrals, renewals, or extensions of any senior
indebtedness. Indebtedness for money borrowed by our company includes all
indebtedness of another person for money borrowed that we guarantee, other
than
the subordinated debt securities, whether outstanding on the date of execution
of the subordinated indenture or created, assumed or incurred after the date
of
the subordinated indenture. However, senior indebtedness will not include any
indebtedness that expressly states to have the same rank as the subordinated
debt securities or to rank junior to the subordinated debt securities. Senior
indebtedness will also not include:
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· |
any
of our obligations to our subsidiaries;
and
|
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|
· |
any
liability for federal, state, local or other taxes owed or owing
by our
company.
|
The
senior debt securities constitute senior indebtedness under the subordinated
indenture. A prospectus supplement will describe the relative ranking among
different series of subordinated debt securities.
Unless
otherwise specified in a prospectus supplement, we may not make any payment
on
the subordinated debt securities and may not purchase, redeem, or retire any
subordinated debt securities if any senior indebtedness is not paid when due
or
the maturity of any senior indebtedness is accelerated as a result of a default,
unless the default has been cured or waived and the acceleration has been
rescinded or the senior indebtedness has been paid in full. We may, however,
pay
the subordinated debt securities without regard to these limitations if the
subordinated trustee and our company receive written notice approving the
payment from the representatives of the holders of senior indebtedness with
respect to which either of the events set forth above has occurred and is
continuing. Unless otherwise specified in a prospectus supplement, during the
continuance of any default with respect to any designated senior indebtedness
under which its maturity may be accelerated immediately without further notice
or the expiration of any applicable grace periods, we may not pay the
subordinated debt securities for 90 days after the receipt by the subordinated
trustee of written notice of a default from the representatives of the holders
of designated senior indebtedness. If the holders of designated senior
indebtedness or the representatives of those holders have not accelerated the
maturity of the designated senior indebtedness at the end of the 90 day period,
we may resume payments on the subordinated debt securities. Only one notice
may
be given in any consecutive 360-day period, irrespective of the number of
defaults with respect to designated senior indebtedness during that period.
In
the
event that we pay or distribute our company’s assets to creditors upon a total
or partial liquidation, dissolution or reorganization of our company or our
company’s property, the holders of senior indebtedness will be entitled to
receive payment in full of the senior indebtedness before the holders of
subordinated debt securities are entitled to receive any payment. Until the
senior indebtedness is paid in full, any payment or distribution to which
holders of subordinated debt securities would be entitled but for the
subordination provisions of the subordinated indenture will be made to holders
of the senior indebtedness as their respective interests may appear. However,
holders of subordinated debt securities will be permitted to receive
distributions of shares and debt securities subordinated to the senior
indebtedness. If a distribution is made to holders of subordinated debt
securities that, due to the subordination provisions, should not have been
made
to them, the holders of subordinated debt securities are required to hold it
in
trust for the holders of senior indebtedness, and pay it over to them as their
interests may appear.
If
payment of the subordinated debt securities is accelerated because of an event
of default, either we or the subordinated trustee will promptly notify the
holders of senior indebtedness or the representatives of the holders of the
acceleration. We may not pay the subordinated debt securities until five
business days after the holders or the representatives of the senior
indebtedness receive notice of the acceleration. Afterwards, we may pay the
subordinated debt securities only if the subordination provisions of the
subordinated indenture otherwise permit payment at that time.
As
a
result of the subordination provisions contained in the subordinated indenture,
in the event of insolvency, our creditors who are holders of senior indebtedness
may recover more, ratably, than the holders of subordinated debt securities.
In
addition, our creditors who are not holders of senior indebtedness may recover
less, ratably, than holders of senior indebtedness and may recover more,
ratably, than the holders of subordinated indebtedness.
The
prospectus supplement relating to a series of subordinated debt securities
will
describe any material covenants in respect of any series of subordinated debt
securities.
DESCRIPTION
OF COMMON SHARES
We
are
authorized to issue an unlimited number of common shares, without par value.
As
of April 14, 2008, there were 160,975,757 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 Gold, 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
Gold 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 and the applicable prospectus
supplement, will be, fully paid and non-assessable.
You
should read the prospectus supplement relating to any offering of common shares,
or of securities convertible, exchangeable or exercisable for common shares,
for
the terms of the offering, including the number of common shares offered, any
initial offering price and market prices relating to the common
shares.
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, 320 Bay Street, P.O. Box 1, Toronto, Ontario, Canada
M5H
4A6, is the transfer agent and registrar for our common shares.
DESCRIPTION
OF WARRANTS
We
may
issue warrants for the purchase of debt securities, common shares or units
consisting of any combination of the foregoing securities. Each series of
warrants will be issued under a separate warrant agreement. The applicable
prospectus supplement will describe the terms of the warrants offered, including
but not limited to the following:
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(1) |
the
number of warrants offered;
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(2) |
the
price or prices at which the warrants will be
issued;
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(3) |
the
currency or currencies in which the prices of the warrants may be
payable;
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(4) |
the
securities for which the warrants are
exercisable;
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(5) |
whether
the warrants will be issued with any other securities and, if so,
the
amount and terms of these
securities;
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(6) |
the
amount of securities purchasable upon exercise of each warrant and
the
price at which and the currency or currencies in which the securities
may
be purchased upon such exercise;
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(7) |
the
events or conditions under which the amount of securities may be
subject
to adjustment;
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(8) |
the
date on which the right to exercise such warrants shall commence
and the
date on which such right shall
expire;
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(9) |
the
circumstances, if any, which will cause the warrants to be deemed
to be
automatically exercised;
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|
(10) |
any
material risk factors relating to such
warrants;
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|
(11) |
if
applicable, the identity of the warrant agent;
and
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(12) |
any
other terms of such warrants.
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Prior
to
the exercise of any warrants, holders of such warrants will not have any rights
of holders of the securities purchasable upon such exercise, including the
right
to receive payments of dividends, or the right to vote such underlying
securities.
Prospective
purchasers of warrants should be aware that special United States federal income
tax, accounting and other considerations may be applicable to instruments such
as warrants. The applicable prospectus supplement will describe such
considerations, to the extent they are material, as they apply generally to
purchasers of such warrants.
SELLING
SHAREHOLDER
The
following table sets forth, as of April 14, 2008:
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·
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The
name of the selling shareholder;
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·
|
The
number of shares and the percentage of shares beneficially owned
by the
selling shareholder;
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|
The
maximum number of shares that may be offered by the selling
shareholder;
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·
|
The
number of shares and the percentage of shares to be beneficially
owned by
the selling shareholder after the sale of all the
shares.
|
The
selling shareholder may offer and sell, from time to time, some or all of the
shares covered by this prospectus. The actual number of shares, if any, to
be
offered by the selling shareholder and the number of shares and the percentage
of shares to be beneficially owned by the selling shareholder following such
offering will be disclosed in an applicable prospectus supplement. We have
registered the shares covered by this prospectus for offer and sale by the
selling shareholder so that those shares may be freely sold to the public by
it.
Registration of the shares covered by this prospectus does not mean, however,
that those shares necessarily will be offered or sold.
| Name and Address |
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Shares Beneficially Owned (1)
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|
Common Shares
Offered Hereby
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Shares Beneficially
Owned After Sale of Common Shares
Offered Hereby
|
|
|
of Beneficial Owner
|
|
Number
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|
Percentage (3)
|
|
Number
|
|
Number (2)
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Percentage
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St
Andrew Goldfields Ltd.
1540
Cornwall Road
Suite
212
Oakville,
Ontario
Canada
L6J 7W5
|
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28,675,000
|
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17.8
|
%
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|
28,675,000
|
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-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)
Assumes that all of the shares currently beneficially owned by the selling
shareholder and registered hereunder are sold and the selling shareholder
acquires no additional common shares before the completion of this
offering.
(3)
The
percentage ownership for the selling shareholder is based on 160,975,757 common
shares outstanding as of April 14, 2008.
PLAN
OF DISTRIBUTION
We
and
the selling shareholder may offer the securities directly to one or more
purchasers, through agents, or through underwriters or dealers designated from
time to time. We and the selling shareholder may distribute the securities
from
time to time in one or more transactions at a fixed price or prices (which
may
be changed from time to time), at market prices prevailing at the times of
sale,
at prices related to these prevailing market prices or at negotiated prices.
We
and the selling shareholder may offer securities in the same offering, or we
and
the selling shareholder may offer securities in separate offerings. The
applicable prospectus supplement will describe the terms of the offering of
the
securities, including:
the
offeror(s) of the securities;
the
terms
of the securities to which the prospectus supplement relates;
the
name
or names of any underwriters;
the
purchase price of the securities (if then known) and the proceeds to be received
from the sale;
any
underwriting discounts and other items constituting underwriters’ compensation;
and
any
discounts or concessions allowed or reallowed or paid to dealers.
If
underwriters are used in the sale, the securities will be acquired by the
underwriters for their own account and may be resold from time to time in one
or
more transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The securities may
be
either offered to the public through underwriting syndicates represented by
managing underwriters or by underwriters without a syndicate. The obligations
of
the underwriters to purchase securities will be subject to the conditions
precedent agreed to by the parties and the underwriters will be obligated to
purchase all the securities of a class or series if any are purchased. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
Securities
may be sold directly by our company or the selling shareholder or through agents
designated by our company or the selling shareholder from time to time. Any
agent involved in the offer or sale of the securities in respect of which this
prospectus is delivered will be named, and any commissions payable by our
company or the selling shareholder to any agent will be set forth, in the
prospectus supplement. Unless otherwise indicated in the prospectus supplement,
any agent will be acting on a best efforts basis for the period of its
appointment.
We
or the
selling shareholder may authorize agents or underwriters to solicit offers
by
eligible institutions to purchase securities from our company or the selling
shareholder at the public offering price set forth in the prospectus supplement
under delayed delivery contracts providing for payment and delivery on a
specified date in the future. The conditions to these contracts and the
commissions payable for solicitation of these contracts will be set forth in
the
applicable prospectus supplement.
Agents
and underwriters may be entitled to indemnification by our company or the
selling shareholder against some civil liabilities, including liabilities under
the Securities Act, or to contribution with respect to payments which the agents
or underwriters may be required to make relating to these liabilities. Agents
and underwriters may be customers of, engage in transactions with, or perform
services for, our company in the ordinary course of business.
In
addition, any securities covered by this prospectus that qualify for sale
pursuant to Rule 144 or Rule 144A under the Securities Act may be sold under
Rule 144 or Rule 144A rather than pursuant to this prospectus.
Each
class or series of securities other than the common shares will be a new issue
of securities with no established trading market. Any underwriter may make
a
market in these securities, but will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can
be
given as to the liquidity of the trading market for any securities.
LEGAL
MATTERS
Lackowicz,
Shier & Hoffman, Yukon Territory, Canada, has provided its opinion on the
validity of the securities offered by this prospectus.
EXPERTS
The
financial statements incorporated in this prospectus by reference from the
Company’s Annual Report on Form 10-K for the year ended December 31, 2007, have
been audited by Deloitte & Touche LLP, Independent Registered Chartered
Accountants, as stated in their report, which is incorporated herein by
reference, which report expresses an unqualified opinion on the financial
statements and includes a separate report titled Comments by Independent
Registered Chartered Accountants on Canada - United States of America Reporting
Differences referring to changes in accounting principles and substantial doubt
on the Company's ability to continue as a going concern, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
Our
Montana Tunnels reserves at December 31, 2007 incorporated by reference
herein were prepared by us and SRK Consulting (US), Inc. All information
regarding reserves incorporated by reference herein is in reliance upon the
authority of that form as experts in such matters.
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
$100,000,000
Debt Securities, Common Shares and Warrants
28,675,000
Shares of Common Shares Offered by Selling Shareholder
PROSPECTUS