Australia's New South Wales (NSW) Department of Planning and Environment has conditionally approved Anglo American’s revised plans for its Drayton South Coal Project expansion.

The independent Planning Assessment Commission (Pac) will now make the final decision on the project.

The project has been rejected twice by the PAC as it may have an impact on nearby horses breeding, forcing the mine to change its development plans.

Following an assessment, the department found that the coal mining and thoroughbred stud industries have operated alongside one another for many years without major impact on either industry.

"The department has concluded that with appropriate management and mitigation measures, the two industries can operate in proximity."

Department of planning and environment spokesperson said: “Based on independent reports, new evidence, and considering the proposed mine now complies with the commission's original minimum setback by remaining behind two natural ridgelines on the site, the department has concluded that, with appropriate management and mitigation measures, the two industries can continue to operate in proximity.

“As a result of this extensive assessment, the department has recommended the project be approved by the commission subject to strict and updated conditions, including an ongoing liaison committee to establish and strengthen relationships between Anglo American and the two key neighbouring studs.”

The department has also recommended 23 detailed conditions to manage dust, noise, blasting and water, including strict air-quality criteria and management requirements, stringent noise criteria.

The conditions also include comprehensive water management performance measures.

Prior to approving the project, the department commissioned an independent peer review to provide a third-party assessment of potential impacts the project may have on nearby studs and the thoroughbred horses industry.

The review considered Anglo American’s response to the commission’s expert review report.

The department also considered new submissions from the Hunter thoroughbred industry, community submissions and findings of the independent commission’s 2015 review report.