Chinese-controlled Yancoal Australia has approached A$1.4 billion ($1.4 billion) Gloucester Coal with a plan to merge their neighbouring coal assets, a source familiar with the deal said on Tuesday.

Media reported that Yancoal was looking to take over Gloucester and use it as a backdoor route for listing in Australia, in what would be the latest in a slew of coal deals in Australia as miners look to tap into booming Asian demand.

Yancoal is required to float at least 30 percent of the company on the Australian Securities Exchange by 2012 as a condition of its A$3.3 billion takeover of Felix Resources in 2009.

Gloucester declined to comment on reports by the Australian Financial Review and Bloomberg that a deal was in the offing.

Yancoal is a unit of China's Yanzhou Coal Mining Co Ltd.

Gloucester is 64 percent owned by Hong Kong-based Noble Group, which has a track record of buying junior miners, helping to fund projects, then selling out.

Noble Group, which tried to sell its stake in Gloucester last year to Macarthur Coal, had no comment on Yancoal's approach to Gloucester.

Shares in Gloucester closed on Monday at A$7.03, having fallen from a peak of A$13.51 in January.

Earlier this week, Whitehaven Coal agreed a $2.5 billion takeover of Aston Resources and a local coal explorer on Monday, creating the nation's biggest independent coal miner which could itself become a juicy target for global predators.

Yancoal is being advised by UBS and Citi, while Gloucester is being advised by Lazard.

source:mineweb.com