First Payment Deferral Gives APG Breathing Room

TARA HASSAN, National Bank Financial (09/30/2009)
"Yesterday Apollo Gold (APG-TSX, Not Rated) announced. . .that it had come to an agreement with its lenders, Macquarie Bank Limited and RMB Australia Holdings, to defer the initial payment due on its $70M project finance facility. The initial payment was scheduled for September 30, 2009.

. . .The Deferred Payment and Deferred Funding Obligation now must be satisfied on the earlier of the completion of the technical review process or December 31, 2009.

We are encouraged to see that APG is working alongside its lenders, as it confirms the discussions we had with APG management in Denver. While there certainly remain some unknown factors relating to the timing and size of payments, yesterday's news is certainly a step in the right direction and will allow APG some breathing room to revisit the project financing facility.

Further we believe the strong gold price, improved operating performance over the last number of months at Black Fox, and increased milling capacity through APG's agreement with St. Andrew Goldfield's should provide some support both through cashflow and investor and lender confidence improving."

We remind investors that APG is currently trading at a significant discount to its peers. . .While we recognize that APG's valuation is deservedly lower than its peers due to its project loan facility and hedge requirement, we are of the opinion that the current discount is too severe and expect APG to get a rerating once there is more clarity on the revised project financing schedule."

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