Maxy looks to tame the dragon

Getting a leg up in a country as vast and notoriously complex as China is no easy task.

The optimism that fuelled an initial rush of foreign miners in the early part of the decade was largely snuffed out by thick rolls of red tape unravelled by the socialist bureaucracy.

But Andre Gauthier, president and chief executive of Maxy Gold (MXD-V), is out to prove that previous failures in China had more to do with a lack of understanding than any inherently insurmountable obstacles within the country.

“We came in after all that stuff happened,” Gauthier says of the initial surge of foreign investors. “We let them sort it all out.”

Gauthier, however, isn’t relying on the advantage of hindsight alone. With 17 years of experience at Cambior (now part of Iamgold (IMG-T, IAG-N) under his belt — nine of which he spent heading exploration activities in Peru — Gauthier has seen what it takes to get things done in cultures that don’t run by North American clocks.

“In any country you go to do business in, you have to remember that you are a visitor,” he says. “(Western companies) have to listen and not dictate.”

With that philosophy in mind, Gauthier left South America to travel to underexplored regions of the world. The search brought him to China.

“The first question was, ‘can we do business in China?'” he says. “And the answer was yes, on the condition that you have a partner. And by partner, I mean a real partner — one that shares in the exploration costs.”

Unlike many other juniors in the country, Gauthier was able to establish such a scenario through a deal with Western Mining Group — a government mining agency. The deal will see the Chinese miner make proportionate contributions to exploration at joint-ventured projects with Maxy.

In addition to the exploration dollars, Maxy is gaining the political and geological know-how of Western Mining, as the company is already mining and producing lead, zinc and copper in China.

The joint venture centres around gold, copper, zinc and lead projects in Qinghai province and Tibet. Maxy has the option to earn a 50% interest in both areas, but has yet to determine which properties it is most interested in.

By having Western Mining buy into Maxy — it holds roughly 3.26 million of its 31 million shares outstanding — Gauthier has ensured that the two companies’ interests are aligned.

“We have access to all the geophysical data, and that will help us to secure the best properties,” he says.

In Qinghai, the Huangnan project lies near the eastern border of the province. Gauthier describes the area as a mining camp with some mines operated by Western Mining.

Maxy has the right to 220 sq. km of prospective land, and Gauthier says the area is one of Maxy’s top priorities in terms of exploration spending.

Those dollars will come from the $7.25 million the company has in the kitty.

Exploration dollars will also flow to Yunnan province — which lies south of Qinghai — where the company’s Luchun and Midu gold projects are located.

Maxy holds an 85% interest in Luchun and a 75% stake in Midu.

At Midu, highlights of seven holes drilled include 3 metres grading 1.6 grams gold (starting at 31.1 metres down-hole) and 16 metres averaging 1 gram gold (starting at 5.4 metres).

But Gauthier is especially bullish on results from an area in the heart of Midu known as Muluozuo.

It is there that one line of trenching returned 18 metres at 2.4 grams gold per tonne and 16 metres at 4.24 grams gold. Another longer trench returned 0.67 gram gold over 177 metres.

Gauthier describes mineralization as colluvial, which indicates that there is a source likely higher up on the formation, he says.

And while colluvial deposits aren’t typically associated with large-scale mining, Gauthier points out that Newmont Mining’s (NMC-T, NEM-N) famed Yanacocha mine includes a colluvial deposit that Gauthier says is similar in structure to Muluozuo.

Maxy shares recently traded at $1.03 in a 52-week range of 75-$1.98.