Local government leaders in Southland have expressed relief that Solid Energy has drawn up specific plans to develop the area's lignite reserves.
The state-owned mining company has chosen its former mine site near the town of Mataura for a plant to trial turning 150,000 tonnes of low grade coal a year into briquettes for heavy industry.
Solid Energy had hoped to use the old Mataura paper mill, but says the site was too difficult to adapt.
Gore district mayor Tracy Hicks says it is good to see firm decisions after years of discussion. Venture Southland says the announcement is a significant step forward.
The new plant will cost about $20 million and employ about 10 people.