New South Wales Planning Assessment Commission (PAC) in Australia has given approval to China Shenhua Energy’s proposed Watermark coal mine project near Gunnedah.

The project, which is expected to produce 10 million tons of coal a year, is yet to receive approval from Canberra to proceed with construction works.

The project will be the company’s first new large-scale mine.

Shenhua intends to develop a open-cut coal mine in the Mt Watermark on the Liverpool Plains and process the extracted coal on-site using a coal handling and preparation plant.

The company plans to extract 268 million tons of run-of-mine coal to produce around 159 million tons of product coal over 30 years which will include 133 million tons of metallurgical coal and 26 million tons of thermal coal.

The Department of Planning and Environment determined the project as a significant development. The PAC was tasked by the Minister for Planning to evaluate the project and hold a public hearing.

PAC said in its report, "The Commission considers that it will be important for the government to undertake some more detailed work to identify and protect those highly valuable, fertile black soil plains where mining should be prohibited, as ongoing uncertainty for the surrounding community does impact on its capacity to plan and invest for the future.

"In balancing all of the issues, the Commission has given particular consideration to how the environmental impacts could be managed to ensure the sustainability and growth of the agricultural sector."

Work on design and management plans for the project will commence after the federal approval process, which is expected to be completed in few months, reports Reuters.

Shenhua expects to commence construction of the project during 2015-16.