The company said that the decision is being taken as the reserves at the 30-year old project have exhaused.
Last year, Anglo’s application for Drayton South coal mine was twice rejected by the NSW Planning and Assessment Commission.
The mine could have been a replacement for the existing Drayton mine by extending its life for 20 years and produce 97 million tons of coal.
Anglo American open-cut operations head Mark Heaton said: "We had hoped Drayton South would have given smooth continuity of employment for our 500 workers and 140 local suppliers.
"However, we now find ourselves in the difficult position of balancing depleting coal levels with extending the mine’s life for as long as possible without approval for Drayton South.
"The redundancy positions will be subject to the business needs and in full consultation with employees."
Anglo American said it has reduced the mine size by 25% to extract 75 million tons of coal over the next 15 years, to secure approval for Drayton South project.
