NSW Premier Barry O'Farrell has given the holders of corruptly-approved mining licences linked to former Labor powerbroker Eddie Obeid and other Labor figures one month to convince the government not to cancel them.
The Independent Commission Against Corruption (ICAC) on Wednesday released a report urging the mining licences for Doyles Creek, Mount Penny and Glendon Brook be cancelled.
The ICAC report comes just months after it handed down corruption findings against Mr Obeid, mining minister Ian Macdonald and former union official John Maitland.
The Doyles Creek licence was awarded by Mr Macdonald to Mr Maitland and a consortium of investors in 2008, allowing the former union heavyweight to turn his initial $165,000 investment into $15 million.
Mr Macdonald was found to have rigged a 2008 tender process by granting the Mount Penny tenement which covered land owned by the Obeid family who earned $30 million out of the deal, with the prospect of making an extra $70 million.
The ICAC found the approvals for the mines were so tainted by corruption the licences should be expunged or cancelled and any pending applications refused.
Legislation cancelling the mines could be accompanied by the power to compensate affected innocent parties, while the government should also consider confiscating money made from the corruptly-obtained licences, the ICAC said.
But Mr O'Farrell said he would give leaseholders NuCoal and Cascade Coal until January 15 next year to make their case as to why the recommendations shouldn't be implemented before taking action.
"The NSW government will then make a decision based on public interest," he said.
Although he would not comment on whether the government would consider seizing assets or profits, Mr O'Farrell said he wanted to "see an end to this sorry saga of Labor corruption".
But Greens MP Jeremy Buckingham said that giving the companies a chance to keep their licences was a "pathetic response, when strong and decisive action is necessary".
NuCoal Resources Ltd acquired the Doyles Creek licence in 2010 and will make an announcement to the market before the start of trading on Friday.
Chairman Gordon Galt said NuCoal was "extremely disappointed" with the ICAC recommendation.
Cascade Coal, which now holds the Mount Penny licence and the licence at Glendon Brook near Singleton, said ICAC's recommendations were unfair to both the company and its shareholders.
"Cascade Coal and its shareholders will be making its case to the government as well as considering all options available to vigorously protect its legal and commercial interests," it said in a statement.
Mr Macdonald also lashed out at the recommendations, saying the ICAC reports had been "extremely destructive for the NSW economy".
"This has created a level of uncertainty, negatively impacting upon the vital jobs and investment," he said in a statement.
He accused the ICAC of handing down findings based on hearsay, conjecture and speculation and said the process denied him basic natural justice and had defamed him.
Opposition Leader John Robertson welcomed the recommendations, saying he would support measures brought forward by the government in response to the report.
