The NSW Land and Environment Court handed down its decision on Xstrata subsidiary Ulan Coal Mines’ challenge to Felix's Moolarben Mine project approval.

Justice Preston found the approval conditions used by Planning Minister Frank Sartor in September last year to approve the Moolarben project were within his power, making the approval valid.

Ulan Coal had challenged the validity of the minister's approval on the basis of sufficiency of water to operate its mine, claiming Moolarben would interfere with the environmental obligations of its nearby Ulan complex.

The area under contention hosts a 40 million tonne coal reserve and forms part of Felix's 350Mt Moolarben lease in the Upper Hunter Valley.

Costs were awarded to Moolarben.

Felix managing director Brian Flannery said the case was without precedent.

“In all of my 35 years in the coal industry I have always dealt with other companies on a fair and even-handed basis. This matter should have never gone to court," he said.

The fight is not over though. Moolarben is now awaiting the decision from the NSW Court of Appeal. Ulan/Xstrata had appealed an earlier decision refusing it the right to challenge the validity of mining leases granted by the minister for mineral resources to Moolarben.

The Warden's Court hearing for compensation to Ulan for its loss of land use covered by Moolarben's mining leases will be heard next week.

Felix has continued working on developing the $A405 million opencut and longwall Moolarben development, with last reports that the design for the mine's infrastructure was well underway.

The complex has planned for sales of about 9Mtpa with future underground expansion capable of adding 4Mtpa.

The development of a longwall is also planned to commence within three years of the opencut commissioning.

Felix was trading up 2.3% mid morning at $22.80.