China's Yanzhou Coal Mining Co agreed to buy Australian coal miner Felix Resources Ltd for $2.9 billion, both firms said on Thursday, further underscoring China's growing appetite for resources assets.

The deal comes amid strained investment ties between the two nations, with China formally arresting four staff from Anglo-Australian miner Rio Tinto this week on accusations they stole state secrets.

China's relentless pursuit of Australian resource companies is also despite the Australian government rejecting China's state-owned Minmetals bid for distressed miner OZ Minerals Ltd this year, forcing Minmetals to submit a revised bid.

Yanzhou's proposed takeover of Felix is subject to regulatory approvals in Australia, including from the Foreign Investment Review Board which vets all foreign sovereign investments.

"We recognise that the offer is subject to a range of regulatory and shareholder approvals in Australia and China and fully respect those processes," Yanzhou said in a statement.

"We will work constructively with authorities in both countries at all times, recognising the importance of this transaction and its potential to deliver significant employment and economic benefits," it added.

In June, Anglo-Australian Rio Tinto walked away from an agreed $19.5 billion tie-up with China's state-owned Chinalco, a decision that some Chinese critics blamed on Australian hostility to Chinese capital.

Yanzhou's proposed takeover of Felix would be China's largest purchase in Australia. China's No. 4 coal producer by market value is offering A$18.00 per share cash, including special dividends, a 6.5 percent premium to Felix's last traded price.

Some analysts had expected Yanzhou's bid to exceed A$20.00 per share as Felix is cash rich, unlike some of the distressed mining companies in Australia. But Felix shares have jumped 92 percent so far this year, far outpacing a 20 percent rise in the benchmark S&P/ASX 200 index .AXJO, Analysts say, some takeover premium was priced in the stock.

The deal implies enterprise value to resources ratio of 4.8 for Felix, compared with a median ratio of 1.4 for all coal deals transacted since December 2005, according to Credit Suisse. In a report this week, Credit Suisse said Xstrata Plc, which operates a mine adjacent to one of Felix's mines, could a launch a counter bid.

Felix, which has mines in Queensland and New South Wales states, produced 4.8 million tonnes of coal in the year to June. Analysts expect the deal to boost Yanzhou's output by about 10 percent.

Trading in Yanzhou and Felix shares were halted this week as the two firms finalised the deal. Talks initially started last year, but there were differences over valuation. UBS advised Yanzhou, while Felix was advised by Citigroup and Wilson HTM.

Investment bankers say Yanzhou's acquisition of Felix is expected to win approval from Australia's Foreign Investment Review board as the assets of the mid-sized company are not strategic, bankers and analysts say.

If completed, Yanzhou's purchase of Felix would be China's third-largest cross-border deal this year, according to Thomson Reuters data. So far this year, Chinese firms have invested about $2.2 billion in Australian energy and resources companies.

Chinese imports of coal more than doubled to around 48 million tonnes of coal in the first half of this year, to meet growing demand for steel and power production. Felix produced 4.8 million tonnes of coal in the year to June.