Australian company Hume Coal has announced plans to build an underground coal mine in the Southern Highlands.

As a first step in the approval process, the company will submit details of the new low-impact project to the New South Wales (NSW) Government next week.

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Hume Coal has designed the new mining system to extract coal for steel making from the Wongawilli coal seam in the Sutton Forest region without causing any harm to the ground water and the environment.

"There will be no damage to surface infrastructure from ground movements due to subsidence, as can be the case with other underground mining projects."

Expected to mine only 35% of coal from the available reserves, the project will leave the majority of the coal in the ground to provide long-term ground stability.

Hume Coal project director Greig Duncan said for the best possible outcome for the local community the company carried out detailed environmental and geological studies in addition to exhaustive engineering design analysis.

Duncan said: "The NSW Government has granted us the responsibility of exploring and potentially developing the resources in the Southern Highlands to the benefit of all the people of NSW and we take this responsibility extremely seriously."

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According to Duncan, the project primarily focuses on addressing the potential concerns of local residents including water, subsidence and visual amenity.

Hume Coal said the project will not involve coal seam gas, open cut or longwall mining.

Duncan added: "There will be no damage to surface infrastructure from ground movements due to subsidence, as can be the case with other underground mining projects."

During the construction phase, the mine is expected to create 400 jobs.