China's fourth-biggest coal miner, Yanzhou Coal Mining Co, is reported to be in talks with Australian coal miner Felix Resources in a takeover bid valued at approximately $3 billion in order to enhance its supplies at a time when market value of many coal miners have declined due to the global economic slowdown.

Felix confirmed to the Australian Stock Exchange, that a suitor was interested in a takeover but did not name Yanzhou as the interested party.

Reacting to media reports, "Felix confirms that there is ongoing interest in a potential change of control transaction, all indications of interest remain incomplete, non-binding and subject to completion of due diligence and other conditions," the Australian miner said in a statement.

According to Australian media reports, executives of Yanzhou had visited and inspected Ashton, the coal mine in Hunter Valley of NSW state of Felix Resourses last Thursday and also conducted a review of the company's account.

Yanzhou already has a presence in Australia since 2004, when it acquired the Southland mine in NSW for about $30 million.

American Metals and Coal International, a mining investment company, took 19.2-per cent stake in Felix for A$188 million in 2007.

Felix is a coal explorer and miner and produces high-grade semi-soft coking coal, used by steelmakers and also produces thermal coal, used by power stations.

It has three mines in Queensland and two in New South Wales and exports the coking coal to Japan, Europe and Korea while it sells thermal coal to power stations in New South Wales and Queensland.

Felix's new coal project in Moolarben holds an estimated 406 million tonnes accessible from an open cut mine and a further 299 million tonnes underground and is estimated that this project would be the key driver to the company's net profit that would more than double to $1.12 billion by l 2011.

The company also holds 15.4 per cent stake in the Newcastle Coal Infrastructure Group that's building the world's largest coal export terminal at an estimated cost of A$1 billion.

The world's largest steel maker ArcelorMittal had shown an interest in Felix this year but settled for a 19.9 per cent stake in Macarthur Coal and mining giant, Vale of Brazil and Swiss miner Xstrata had also envisaged ideas of acquiring Felix.

Australia's coal mining has attracted a host of international companies, especially from China, which although has a huge quantity of coal reserves but most of it is of low grade quality, making them look at overseas market to secure its supplies.

China's largest coal miner, Shenhau Energy, last month paid nearly A$300 million for a coal exploration licence in Australia and in September, Xinwen Mining acquired coal tenements in Queensland of Linc Energy for $1.5 billion.

In February, Swiss miner, Xstrata acquired Jubilee Mines for A$3.1 billion and Luxembourg based ArcelorMittal took a 19.9 per cent stake in Macarthur Coal.