The Department of Planning in New South Wales (NSW) will support Centennial Coal's plan to extend mining at Springvale underground coal mine for a further 13 years.
The mine currently produces 5.5 million tonnes of coal a year.
The department's decision came after conducting extensive reviews and involving analysis by independent experts and community consultation.
The proposal must still be referred to the independent Planning Assessment Commission for a final decision.
Department of Planning and Environment spokesperson said that the expansion would bring in 310 full-time jobs in addition to another 60 jobs during construction period as well as 1,200 indirect jobs across NSW.
"In addition, $200m in royalties, taxes and other income will be provided back to the State to be spent on services such as hospitals, school and roads."
The mine expansion approval was provided with a number of strict conditions which include stringent limits on the salinity of mine-water discharges developed by the Environment Protection Authority and requirements on offsetting subsidence impacts to upland swamps.
An action and monitoring plan needs to be undertaken for the Upper Coxs River, as part of the requirements.
Springvale mine is located 15km from Lithgow to the west of the Blue Mountains and provides coal for the Mt Piper Power Station, which is responsible for supplying 15% of the NSW energy supply.
Once the proposal receives approval from the commission, it will be subject to regular inspection and review by the Department's Compliance Officers.
Image: The Springvale pit top. Photo: courtesy Centennial Coal.