The NSW government is believed to be preparing to consider the company's Watermark mine koala management plan, however, the situation for the species has dramatically changed since the mine was approved five years ago.

Recent investigations by the Lock the Gate Alliance estimated koala numbers had fallen to 0.04 per hectare on the site, representing a decline of 87% since 2012-13.

Shenhua has until the end of June to submit environmental management plans and apply for its mining licence or a cancellation clause will be triggered that would effectively allow the state government to terminate the project.

LTGA spokeswoman Georgina Woods said the Watermark coal mine simply should not be allowed to destroy koala habitat, given the catastrophic impact the recent bushfires and drought had on koalas in the state.

The alliance has written to NSW planning minister Rob Stokes urging him to start negotiations with Shenhua to stop the project, even if it means paying compensation to the company.

Woods said 10,000 koalas in NSW might have died as a result of this summer's bushfires and the drought and the Watermark coal mine was expected to displace more than 260 koalas when it was approved in 2015.

"Given what has occurred across the rest of NSW, we believe every effort must be made to stop their localised extinction on the Liverpool Plains, beginning with revocation of the Watermark coal mine development consent," she said.

"Given the gravity of the situation facing koalas in New South Wales, money should be no obstacle to saving these beloved animals."