The Shenhua transaction is similar to a deal done last year when the NSW government bought back the exploration licence for BHP's Caroona project for $220 million.
NSW Resources Minister Don Harwin said the state would be left with a controlling 51.4% stake in the Shenhua exploration licence.
"Any future mining activity will now be restricted to the ridge lands," he said.
Shenhua already has approval to explore the ridge lands under strict water management arrangements and other conditions.
Local MP Kevin Andrews said the deal struck a balance between preserving agriculture and creating jobs.
"Farming and mining have long been the backbone of this region's economy," Andrews said.
The NSW Minerals Council said the agreement was a good outcome for the New England region because it would secure hundreds of jobs, particularly around Gunnedah, and provide a genuine economic boost to the whole region.
It said it would lock in about 600 new local jobs and ongoing economic growth for the region, as well as royalties.
“The project has been approved by the NSW and Commonwealth governments following a three year assessment period where potential impacts on land and water in the region were heavily and independently scrutinized,” the NSWMC said.
“And despite the rhetoric of some, there will be no mining on the blacksoil Liverpool Plains.”
Mining has a very small footprint in the region. According to the NSW government’s Strategic Regional Land Use Plan for the region, mining operations use less than 0.1% of land, compared to about 70% used by agriculture, a ratio that will hardly be affected by this project.