The Department of Planning, Industry and Environment has recommended the project is "approvable" and pushed the application to the Independent Planning Commission (IPC).

The application seeks to extend the Vickery coal mine, about 25km out of Gunnedah, and develop a new coal handling and preparation plant, as well as a rail spur line to connect to the main railway that leads to the Port of Newcastle. This would mean the end of coal trucks transporting the goods on the road to Gunnedah.

The project - which went on public exhibition in the latter half of 2018 - attracted 560 submissions with 345 in support of the project, and 201 who opposed the plan.

In September last year, Vickery Coal submitted an amended application. It's expected to generate 450 jobs as well as 500 during construction, as well as a net benefit of $1.16 billion to the state.

The Department released its report on Tuesday and highlighted key issues for the IPC to consider which included impacts on water resources, amenity and biodiversity.

The report from the department will now be considered by the IPC who will hold a further public hearing in coming weeks.

The IPC must make a final determination on the project within 12 weeks.

Whitehaven Coal issued a statement on Wednesday welcoming the release of the report.

"We know there is strong support for Vickery from the comprehensive community consultation process that has already been undertaken - 60% of public submissions to the Department of Planning and 75% to the IPC called for the Project to be approved," Whitehaven Coal Managing Director and CEO Paul Flynn said

But in April, the mining giant put all expansion decisions on hold due to "volatile financial market conditions", including the Vickery mine expansion.

"While coal markets in the March quarter have demonstrated their resilience, volatile financial market conditions caused Whitehaven to continue to be cautious in allocating capital to expansion," the company said at the time.

Lock the Gate - a vocal opponent of the expansion plan - has long maintained the coal mine "will damage local groundwater, put an iconic heritage property at risk, and worsen the social damage large-scale mining has already inflicted on the local community".