Rio Tinto's bid to expand its Mount Thorley Warkworth open-cut coal mine near Bulga in the New South Wales Hunter Valley has been rejected by the Supreme Court on the grounds it would cause more harm than good.

Rio Tinto and the NSW Planning Minister Brad Hazzard filed a joint appeal last year after the Land and Environment Court overturned the development approval for the mine.

Lawyers for the two parties tried to establish errors at law in the court's decision to revoke approval for the expansion, but today the Supreme Court dismissed the appeal and ordered the State Government and Rio Tinto to pay legal costs.

Rio has already indicated it would resubmit a similar development application under a controversial new planning policy introduced after last year's court ruling.

It previously said the expansion was vital to save 1,300 jobs.

It is a win for the Bulga Milbrodale Progress Association, whose members would have been heavily impacted by the mine's expansion.

The association's John Krey said the Government has no option but to reject the plans.

"It is exactly the same application as they put in four years ago and both courts, that's the Land and Environment Court and the Supreme Court, have both said no," he said.

"So we are saying to the Department of Planning and Rio Tinto: bugger off."

The NSW Government said it was considering the implications of the decision.

Mr Hazzard said no formal development application has been received and any would be assessed on its merits.