For years it has been a mystery where Adani would get the money to build its giant Carmichael coal mine in North Queensland.

Key points: Chinese state-owned enterprise CMEC in negotiations with Adani

Chinese state-owned enterprise CMEC in negotiations with Adani Deal would involve CMEC given manufacturing contract in return for procuring finance

Deal would involve CMEC given manufacturing contract in return for procuring finance Some close to the negotiations sceptical about deal being finalised

Now we may have the answer.

The ABC has learned that a Chinese state-owned enterprise, China Machinery Engineering Corporation (CMEC), is in negotiations with Adani and its principal engineering and procurement contractor, Downer EDI.

If the deal goes ahead, it would see CMEC awarded contracts to build key mining plant and equipment in return for China's financial backing of the Carmichael mine.

CMEC is listed on the Hong Kong stock exchange, but is 78 per cent owned by the giant Chinese state-owned enterprise China National Machinery Industry Corporation Ltd, or Sinomach.

Earlier this year, a senior Adani executive, Praveen Khandelwal, and the chief executive of Downer EDI Mining, David Overall, visited China as guests of CMEC.

They were guests of CMEC president Zhang Chun.

After the visit, Mr Zhang announced that CMEC "hoped to cooperate with Adani and Downer to take part in financing, construction and operation of relevant coal mines and railway projects" as well as construction of new energy projects in Australia.

According to CMEC, the executives from Adani and Downer in turn expressed their desire that the three parties "jointly complete the coal and railway projects under Adani and achieved all-win results".

Downer, CMEC and Adani still in negotiations

Some months on, the ABC has been told, Downer, Adani and CMEC are still in negotiations.

According to a source close to the negotiators, the deal with CMEC would involve it being given a contract to manufacture the mine's coal handling and processing plant in China, along with other incentives, in return for procuring finance for Adani's mine.

The financial support could include CMEC taking a direct equity stake in the Adani Carmichael project, procuring financing from Chinese banks or export credit agencies, or both.

"Certainly, CMEC are happy to take equity stakes — they have a history of taking minority equity takes in some of its engineering procurement-construction projects," said Tim Buckley, an energy analyst with the Institute for Energy Economics and Financial Analysis, which opposes the Carmichael mine.

"They have an in-house financing division and they work in strategic alliance with the China Construction Bank and the China Import Export Bank, two state-owned enterprises."

Last month, the CEO of Adani Mining, Jeyakumar Janakaraj, told Reuters Adani was looking to sell minority equity stakes in the coal mine project and rail line to financial institutions and contractors to help with the funding.

He said Adani had secured support from export credit agencies which would finance mining equipment for the venture.

Adani 'well advanced in securing finance' spokesman says

The boutique investment bank Grant Samuel has been shopping the Adani Carmichael project to potential investors in Asia, looking for financial support and equity partners.

Mr Buckley has long argued that Adani's Australian mining project was not viable, but said support from Chinese state-owned enterprises and Chinese export credit agencies could change that.

"The risk is that the combination of a billion-dollar subsidised loan from the Federal Government from the Northern Australia Infrastructure Facility, a $600 million royalty holiday from the Queensland Government and support from Chinese state-owned enterprises could mean that this project is able to achieve financial close," Mr Buckley said.

Last week at a Senate hearing, officials from the Department of Foreign Affairs and Trade (DFAT) confirmed Australian government ministers had written to the Chinese Government in support of the Adani mine, confirming it had all necessary approvals, in a bid to help secure finance.

This followed a Freedom of Information request to DFAT about requests for foreign financing of Adani's Australian project which "captured several hundred pages of documents".

The ABC has received mixed reports on prospects of Adani reaching agreement with CMEC and procuring financial backing for the mine.

If the deal does go ahead with backing from Chinese state-owned enterprises, it could see Australia providing big direct and indirect subsidies to a company effectively owned by an Indian billionaire and the Chinese Government.

Some close to the negotiations are sceptical about a deal being finalised.

Adani's spokesman would not comment, other than to say Adani was "well advanced in securing finance".