China-based Yanzhou Coal Mining is in talks with Australian miner Gloucester Coal for a proposed merger deal to create an A$8bn ($7.9bn) coal mining company.

The proposed merger between Gloucester and Yancoal Australia, a unit of Yanzhou, is expected to create Australia’s largest independent coal producer.

Gloucester has requested trading of its shares to be temporarily stopped pending the release of an announcement by the company, reports AFP.

The company said the trading halt is necessary as it expects to make an announcement in connection with a possible change of control transaction.

The trading halt will remain in place until the commencement of trading on 22 December 2011, unless Gloucester makes a further announcement. The takeover deal is subject to approval by the Australia’s Foreign Investment Review Board.

Gloucester is a coal producer with exploration and mining operations in New South Wales and Queensland states. It has a market capitalisation of about A$1.44bn ($1.43bn).

Yanzhou Coal plans to sell up to $2.4-billion bonds over the next three years and is China’s fourth-largest producer of coal.

Yancoal’s reverse takeover plan is in accordance to let the company fulfill its commitment to Australia’s regulators.

As a condition of its takeover, Yancoal is required to float at least 30% of the company on the Australian Securities Exchange by 2012.