South32 said the impairment charge would also include the resultant potential impact of the decision on the economics of its Illawarra Metallurgical Coal subsidiary.

"We have scaled back activity on the DND project while we consider alternative options following the IPC decision," the company said.

"This includes the commencement of proceedings in the Land and Environment Court of NSW for a judicial review of the decision and the potential submission of an alternate mine plan to the NSW minister for planning and public spaces for determination of the project as State Significant Infrastructure."

The company said it would be in a position to provide an update on the situation later this year.

South32 sought planning approval to extend the life of the Dendrobium longwall mine until the end of 2048 and extract an additional 78 million tonnes of run-of-mine coal through 21 longwall panels from two additional areas near the Avon and Cordeaux dams.

The IPC claimed 18 of those panels would have a void width of 305m and that revised plans by the company did not adequately address the problems with the longwalls.

The IPC decision puts at threat 700 jobs in the Illawarra region, $714 million in royalties, taxes and rates and an economic impact of about $2.8 billion.

IMC saleable production increased 9% to 7.6 million tonnes in 2020-21 because the return to a three longwall configuration delivered greater efficiencies through the operation of alternate dual longwalls at the Appin mine and it monetised further low-margin coal wash material.

While this product attracts considerable grade and product-type discounts to the AP15 index for energy coal sales, the incremental volume benefits its operating unit costs by eliminating coal waste emplacement.

"Notwithstanding, FY21 operating unit costs are expected to be moderately higher than guidance of US$83 per tonne as a result of lower than planned total coal volumes," South32 said.

"Metallurgical coal production decreased by 15% during the June 2021 quarter as we encountered challenging strata conditions and completed a planned longwall move at our Appin mine during the period."

Three longwall moves are scheduled across FY22, including in the December 2021 quarter, March 2022 quarter and June 2022 quarter.