Abstract The Kosovo lignite mines are operated at one of the most favourable lignite deposits in Europe due to its geological conditions. With an average stripping ratio of 1,7 m3 of waste : 1 t of coal, coal production at Kosovo mines could supply a most competitive fuel to the power plants, compared to international fuel sources and energy prices. The total estimated resources of approx. 11,500 million t represent one of the richest lignite sources in Europe, which would allow ambitious power generation and expansion schemes for the future. The two opencast mines Mirash and Bardh operated by Kosovo Power Corporation reached their maximum coal production in 1988 with 10,6 million t. The installed capacity, however, was sufficient to supply the power plants Kosovo “A” with installed capacity of 790 MW and Kosovo “B” with 678 MW, a coal drying plant and other local consumers. The present situation at the mines, however, is determined by an uneconomical mining operation due to numerous constraints caused by the war and post-war situation and consequently a low production level. Energy Strategy and Policy of Kosovo, the so called “White Paper” is based on use of domestic lignite reserves for power generation. It also foresees installation of new lignite-fired power plants with installed capacity varying from 300 – 900 MW depending on results that New Power Plant Feasibility Study will show. However, reserves in the boundaries of the existing mines will be depleted within next 5 to 7 years. In order to secure safe supply of existing and new power plant with fuel a new lignite mine has to start with coal production not later that 2008. Before starting drafting these two projects it is important to simulate economic analysis of such new mine by estimating coal demand from the existing and for new power plants that may vary between 11 – 20 million t of lignite per year.