Resources giant Boral has indicated it will fight a legal challenge to overturn the recent approval to increase coal production from the Medway colliery near Berrima.

The Planning Assessment Commission has given Boral the go ahead to lift output from the historic mine to more than 400,000 tonnes a year.

The Coal Action Group, some local residents, and the Environmental Defenders Office are planning to fight the approval .

They say they are concerned at the effects increased mining activity  will have on ground and surface water supplies around Medway.

Boral says it will fight the action, which will be heard in the Land And Environment Court.

Company employees are concerned any move to alter the approval could effect the future of the Berrima Cement works, which used the Medway coal in its production process.

Boral is already struggling in the face of the economic downturn and imports from overseas