Australia-based Coal of Africa has received a 20-year water use licence from the South Africa Department of Water and Sanitation (DWS) for Makhado project in Limpopo Province.
In 2013, the company completed a class II definitive feasibility study on the project.
CoAL expects the colliery to produce 2.3 million tonnes per annum (Mtpa) of hard coking coal and a further 3.2Mtpa of thermal coal.
After carrying out several tests, it has been confirmed that the coal can be used to produce high-strength coke for the steel manufacturing industry.
CoAL CEO David Brown said: "The granting of the IWUL for the Makhado Project is a significant milestone for CoAL, and is a further step towards bringing the Makhado Project into production.
"It further signifies government's commitment to and support of our flagship project, and its potential to foster socio economic transformation not only for the communities in our area of operation, but also for the Limpopo Province."
The company plans to begin construction activities on the mine in the second half of 2016.
In a separate announcement, CoAL said that the licence for its Vele Colliery in the Limpopo Province has been renewed for a further 20 years.
The original IWUL was granted for five years in March 2011.
The licence has been amended in line with the requirements for the plant modification project (PMP) at Vele.
CoAL began a process to obtain approval relating to a non-perennial stream diversion during the second half of 2015.
Upon receiving this regulatory approval, final decision to proceed with the PMP will be placed by the company before the board.
Image: CoAL expects to produce 2.3Mtpa of hard coking coal from the Makhado project. Photo: courtesy of Coal of Africa Limited.