Reuters quoted a source familiar with the deal said Chinese controlled Yancoal Australia has approached AUD1.4 billion Gloucester Coal with a plan to merge their neighboring coal assets.

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% of the company on the Australian Securities Exchange by 2012 as a condition of its AUD 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 Yanzhou Coal Mining Co Ltd. Gloucester is 64% 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 approach to Gloucester.

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

(Sourced from Reuters)