The Australian government was under fire Thursday after approving a huge Chinese-run coal mine near prime farmland, sparking division in its own ranks with Agriculture Minister Barnaby Joyce complaining that "the world has gone mad".

Joyce called the decision "ridiculous" after Chinese company Shenhua was granted approval for the Aus$1.0 billion (US$740 million) Watermark mine near Gunnedah in New South Wales state, under 18 conditions the government said were among the strictest in Australia's history.

"I've never supported the Shenhua mine. I think it is ridiculous that you would have a major mine in the midst of Australia's best agricultural land," Joyce said on Facebook about the project, which is in his constituency.

"I've done everything in my power to try and stop the mine."

He added that "the world has gone mad" if a mine could get the go-ahead near prime farmland, citing the case of a house in the area that was not allowed to be built because it would impact a nearby woodland.

Large-scale mining in rural areas and concerns about valuable agricultural and mineral assets passing into foreign hands is a hot topic in Australia, with the government earlier this year tightening scrutiny on overseas investment in farmland.

The NSW Farmers Association blasted the Shenhua move as the government turning a "food bowl into coal". The area is known for its rich black soil, excellent water resources and ideal climate.

It said the Shenhua Watermark Coal Project, with a mine life of 30 years, would "disturb an area of over 4,000 football fields in size, in the middle of some of Australia's best farming country".

"Our members and the local community are more than disappointed -- they are devastated over the lack of political will to protect this area," said association president Fiona Simson.

"Our farmers and community are sick of having to live with a flawed government planning process which has failed to implement the required measures to adequately protect agricultural land from inappropriate projects here and in other areas of the state."

But Environment Minister Greg Hunt, who approved the mine this week, said he had listened to community concerns and put strict conditions on the mine, with Shenhua needing to complete water and biodiversity management plans before any mining starts.

"There will be no impact on the availability of water for agriculture," Hunt said.

Another condition includes the power to stop mining if there were any effects on agricultural water supply. In the event that it did occur, the mine must immediately provide an alternative water supply to farmers.

National broadcaster ABC said a legal challenge had been launched by the NSW Planning Assessment Commission in a last ditch bid to halt the mine, on claims officials failed to properly consider the impact on a local koala population.

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