SYDNEY •Australia has bought back most of a contentious mining licence issued for a huge Chinese-run coal mine near prime agricultural land, officials said yesterday, but farmers are still not happy.

Chinese company Shenhua was granted the original exploration licence for the A$1 billion (S$1.05 billion) Watermark mine, in New South Wales (NSW), in 2008 by a previous Labor government.

But the decision was challenged by local farmers and environmental activists, who blasted it as harmful to a region known for its rich soil, water resources and ideal climate.

Large-scale mining in rural areas and foreign ownership of key agricultural and mineral assets are sensitive topics in Australia, with Canberra knocking back several sales in recent years citing national interest.

Under the new arrangement, the current NSW Liberal government has taken back 51.4 per cent of the exploration licence for A$262 million.

"This government has determined there should be no mining on the fertile black soils of the Liverpool Plains," NSW Resources Minister Don Harwin said. "Any future mining activity will now be restricted to the ridge lands."

Local farmers, who have been fighting against development of the mine, said the licence buyback did not go far enough.

"If (the NSW government) was serious about protecting farmland, it would have cancelled the coal licence outright and stopped this coal mine," Mr Andrew Pursehouse, whose farmland is beside the proposed mine, said.

The Liverpool Plains area offers some of Australia's best grazing and cropping. It is known as one of Australia's "food bowls", but is also a rich coal basin.

AGENCE FRANCE-PRESSE