He told ILN he does not see any big reasons why it should be a problem from FIRB’s perspective.

This week FIRB has given approval to Gujarat NRE Minerals, an Australia-listed subsidiary of India’s steel producer Gujarat NRE Coke, to acquire up to 100% of Rey Resources through its current takeover offer.

Approval was also granted earlier this year to Hong Kong-based commodities trader Noble Group for its off market cash bid for Gloucester Coal which nearly resulted in a complete takeover.

Yanzhou already has exposure to Australia’s coal industry, having picked up the former Southland (now Austar) mine in New South Wales’ Hunter Valley for $US23 million in October 2004 after fire ravaged the colliery the previous Christmas.

Looking at what Australian coal companies are left for a possible takeover, Harrington said the upper end of the mid-cap space in the sector had few obvious pickings.

He noted that New Hope was 61% held by Australian pharmaceutical retailer and fund manager Washington H. Soul Pattison.

Macarthur Coal already has an interesting shareholder mix with China’s Citic Group using creep provisions to increase its stake to 23.4% in April, while steelmakers ArcelorMittal and POSCO own 19.9% and 10% respectively.

Despite the recent activity in Macarthur shares, Harrington does not view a takeover of the Queensland coal producer as likely given its shareholder offtake commitments.

“That leaves Whitehaven and perhaps Aquila and that’s about it,” he said.

Felix remains in a trading halt because of a potential change of control transaction, with the Australian newspaper reporting that Yanzhou offered about $A18 a share.

Shares in Felix last closed at $16.90, while Macarthur shares closed up 16c yesterday to $8.28.