The probable takeover of Gloucester by Yancoal has been generally viewed as logical by market analysts but Gloucester area residents are less sure, with some fearing further environmental damage.

Gloucester is already controlled by Hong Kong-based Noble Resources but Yancoal’s Chinese backing means the deal will probably need federal approval through the Foreign Investment Review Board.

Yancoal is part of one of China’s biggest government-owned mining companies. It began operations in Australia in 2004 when it bought the long-troubled Pelton/Ellalong underground mine near Cessnock and changed methods.

Two years ago it paid $3.3billion for Felix Resources, picking up two mines exporting from Newcastle, Ashton and Moolarben, and another two in Queensland.

Gloucester Coal operates the Gloucester and Duralie open-cuts near Gloucester and the Abel and Tasman underground mines west of Lake Macquarie through its purchase earlier this year of Donaldson Coal.

It also has a 50per cent stake in the Middlemount resource in Queensland that Nathan Tinkler sold out of to build his fortune.

Gloucester and Yancoal are viewed by the market as ‘‘second tier’’ producers behind such mining giants as BHP Billiton, Rio Tinto and Xstrata.

After speculation about the deal in yesterday’s Australian Financial Review, Gloucester Coal directors sought a trading halt.

Coal shares have fared better than most in recent months but the industry appears to be hitting harder times, with production costs rising and coal prices falling.

A Yancoal takeover of Gloucester might make sense on operational grounds but a Gloucester environmentalist is concerned.

Ironstone Community Action Group spokeswoman Amanda Albury said Gloucester and Duralie mines were promised originally as ‘‘boutique’’ operations but had grown to become ‘‘anything but boutique’’.

‘‘As a group we are concerned about the operations themselves and personally I am concerned about the way Australia puts Chinese human rights to one side to cut deals with a totalitarian regime,’’ Mrs Albury said.