In February the state's Independent Planning Commission (IPC) refused the miner's application to expand the mine further beneath the drinking water catchment in order to extend the mine's life to 2048.

The IPC found the potential for irreversible damage to the environment, particularly catchment, too great and knocked it back.

But South32 has now announced it will head to the Land and Environment Court in a bid to have the IPC decision struck down.

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This did not sit well with Illawarra environment group Protect Our Water Alliance, whose spokeswoman Nicole Morahan said the development was "disappointing".

"The IPC found this expansion would risk the long-term and irreversible damage to the Greater Sydney drinking water catchment," Ms Morahan said.

"We believe the IPC process was done lawfully and we hope that that holds up.

"We will consider our response and continue our campaign to stop mining in the water catchment."

South32 has claimed widespread community support for the expansion, which would secure the future of hundreds of local coal jobs.

Ms Morahan disagreed.

"The community has been very loud in their being against this proposal due to the environmental risks," she said. "What the community really wants is a transition plan - we want our leaders to respect the IPC decision and start coming up with a plan to help our community move away from coal."

But the appeal drew support from the Construction Forestry Maritime Mining and Energy Union's district vice-president Bob Timbs.

"We support the company's decision to appeal the IPC's decision," he said.

"The continued operation of the Dendrobium mine is critical to the Illawarra and broader coal industry."

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