Early projections are that the mine could produce 210 million tonnes of coal over the 21-year lease period.

Watermark project director Joe Clayton said with exploration drilling proceeding well, the feasibility study was the next key milestone.

“The study will commence immediately and aims to be completed by September,” Mr Clayton said.

“(It will) provide the company with the information needed to define the scope and economic viability of the project.”

Mr Clayton said should a viable mine be identified the company would then proceed to the approval stage.

“Subject to the issue of all environmental planning and mining approvals, Shenhua anticipates construction of the mine to commence in 2012, with production commencing in 2013.”

The feasibility study will include a coal marketing plan, wash plant and mine infrastructure design, determination of mining method, a comprehensive water model, geotechnical assessments, production rates, rail and port logistics and an economic model.

Mr Clayton said GHD was one of the world’s leading engineering, architecture and environmental consulting firms.

“A key feature of GHD’s proposal is to generate significant gains in technical and economic efficiencies ... while minimising environmental and community impacts,” he said.

The Watermark Project covers a 195 square kilometre area approximately 35 kilometres out of Gunnedah and comprises three different coal seams, Hoskisson, Melville and Maules Creek.

Mr Clayton said Shenhua currently has six rigs on the site and 200 exploration holes completed.

“To date, (we have) identified potentially significant deposits of thermal quality coal contained in the Hoskisson and Melville seams,” he said.