Xstrata has built a new section of railway in the Southern Highlands after concerns were raised that its mining operations could damage existing tunnels.
The new 1.8 kilometre section of rail snakes around the Redbank Tunnel on the Southern Highlands between Tahmoor and Picton, The ABC reported.
Xstrata Coal said mining activity at Tahmoor could have compromised the tunnel, so a relocation was proposed to go around it.
The project received approval in April and construction began shortly after.
The new section of the track was opened on the weekend, while the sealing of the old tunnel with be completed next year.
Xstrata own and operate the Tahmoor underground mine near Sydney, which primarily produces hard coking coal.
According to the company's website production at the site in 2011 reached 1 721kt.