Trading of Felix Resources (ASX: FLX; OTC: FLRFF) shares was halted on Monday amid pending news of a “change of control”–language typically associated with an impending takeover.

Although neither party to the deal has commented directly, the bidder is China’s Yanzhou Coal Mining (NYSE: YZC); Yanzhou’s shares have also been suspended from trading in the US pending an announcement.

I’ve been writing for months that China would move to acquire coal assets in Australia, the world’s most important exporter of both thermal coal used in power plants and metallurgical coal used in steelmaking. I’ve also noted that Felix would be one of the most logical targets for a Chinese firm looking to buy reserves because it’s a large producer with the scope to significantly increase production from new mines in coming years. It appears just such a transaction is now in the works.

Pending a finalized agreement and the approval of the Australian government, the deal would be the largest Chinese takeover in Australia. Although the popular and political uproar incited by Aluminum Corporation of China’s (NYSE: ACH) efforts to acquire Rio Tinto (NYSE: RTP) ultimately scuttled that deal, reactions to this latest takeover likely won’t be as vociferous. Not only does Felix lack the size and strategic importance of Rio Tinto, but the company also exports most of its production.

The rumored price of the deal is AUD19 to AUD20 per Felix share, roughly a 12 to 18 percent premium to Felix’s closing price last Friday. This would represent a gain of 48 percent based on our initial entry price of AUD13.45 in the June 3, 2009 issue of TES, The New Super-Cycle. 

Don’t be surprised if Felix shares trade above Yanzhou’s offer price once trading resumes. It’s possible that a competing bid will emerge in coming months. Global mining giant Xstrata (London: XTA; OTC: XSRAY) is rumored to be in the. The company would be a logical bidder because it owns coal mines adjacent to Felix’s operations.

But Xstrata is only one of a handful of Chinese, US and Australian firms rumored to be interested in buying up Australian coal reserves.

If Xstrata does emerge with a competing bid in coming weeks, the situation could get interesting quickly. Relations between China and Australia soured after the Rio Tinto deal fell through and the Chinese government accused some Rio employees of espionage. China will be keen to prevent another big deal from falling through the cracks; it’s quite possible that a bidding war for Felix could ensue.

This is all great news for Felix shareholders. A bidding war could push the sale price to the mid-AUD20 range. I recommend that investors hold Felix Resources pending further news on the takeover.