Last December Gloucester informed the market of a proposed merger, which would position Gloucester as Australia’s largest independent coal mining company.

Swan said the merger would allow Yancoal's parent company, Yanzhou, to achieve a listing of its Australian operations by the end of 2012, a condition of its acquisition of Felix Resources Limited in 2009.

He said he would extend the time required for Yanzhou to reduce its ownership of Yancoal to below 70% in light of “sustained volatility in global financial markets.”

“I have provided Yanzhou with an additional 12 months, to the end of 2013, to meet the condition that it reduce its economic ownership of Yancoal to less than 70 per cent, which was also required as a condition of its acquisition of Felix,” Swan said.

Yancoal chief executive Murray Bailey told the Australian Financial Review the one-year extension could enable more stability in initial trading of the merged group.

Yanzhou will also be required to reduce its economic ownership in two assets that have been excluded from the merger, Syntech Resources and Premier Coal, by the end of 2014.

Yancoal will manage these assets in the interim while Yanzhou reduces its ownership.

Yanzhou will snare a 78% stake in the Yancoal and Gloucester merger, if it goes ahead.

Swan said Australia’s economy would reap the rewards of the deal.

“Yanzhou's investment in the Australian coal industry will allow for the further development of Australia's coal deposits, which will have positive impacts on employment and growth in the sector and more broadly for the economy,” he said.

The merger remains subject to Foreign Investment Review Board approval, Yanzhou shareholder approval and various other Australian and Chinese regulatory approvals.

Gloucester’s largest shareholder, the Noble Group, has said it would vote in favour of the merger in the absence of a superior proposal.