The NSW government is paying $100 million to stop coal mining on prime agricultural land.

The Berejiklian Government has paid Chinese firm Shenhua $100 million to give up on plans for the Watermark open cut mine at Breeza near Gunnedah.

The mine was planned for some of the best agricultural land in Australia.

Deputy Premier John Barilaro said he personally negotiated the deal, after realising the approved mining application had “divided” the local community and caused “a lot of anguish”.

“Today is your victory,” Mr Barilaro said while making the announcement in Breeza.

“It's not our victory.”

The government says it will legislate to prevent any future mining on the land, and is expected to take control of the site.

The government also ruled out any future open-cut mining at the Dartbrook mine in the Upper Hunter, but has left the door open for an underground mine operation.

At the same time, the government is ramping up mining elsewhere, launching a tender process for an exploration licence near Wollar in the Central West.

More mining was planned in this area before last year, when the NSW Government published a mining strategy that decided which parts of the state would see more or less exploration.

“You'll find that the future of the coal map will continue to rule out parts of the state in relation to coal mining but there are parts of the state where it is appropriate,” Mr Barilaro said.

“We do not demonise the coal industry.”