Alkane Resources’ Dubbo Zirconia Project has been recommended for approval by the Planning Assessment Commission.
PAC said the project could go ahead as long as strict conditions around air quality, water, transport and biodiversity were met.
The DZP will now move to the Department of Planning and Environment before being handed back to PAC for a final determination.
Located 25 kilometres south of Dubbo, the $1 billion DZP is promoted by Alkane as a strategic and alternate source of zirconium and heavy rare earth products capable of long-term supply.
The mine would extract up to 19.5 million tonnes of rare metals and rare earths ore from a small open cut mine over 20 years at a rate of 1 million tonnes per year and produce 75,000 tonnes of concentrate.
If the project gets final approval it will create 450 jobs, with Alkane targeting first production in 2016.
Alkane said an initial review of the PAC recommendations indicated that there is nothing that raises any material concerns for the development of the project.
The key areas considered by PAC related to air quality, water impacts, transport, longterm landform and land use.
Other issues considered included impacts on Taronga Western Plains Zoo, the pink-tailed worm lizard and Fossil Hill, hazards and risk (including radiation) and loss of agricultural land for biodiversity offsets.
PAC said the mine would contribute around $50 million a year to the local economy and around $12 million a year to the state in royalties.