Sections of the community protest against the licence application early this month.
Queensland's Attorney-General Deb Frecklington announced the decision in Bundaberg on Tuesday morning.
"The next stage in this matter is that the department will hand me a full brief when a final decision can be made," Ms Frecklington said.
"As soon as I'm in a position to do so, the community will be the first to know."
She said any litigation was "really is a matter for Fox".
Fox Resources said it had received the government's preliminary view and would seek advice.
It applied in 2019 for a mineral development licence (MDL) to explore more than 7,800 hectares of agricultural and residential land about 20 kilometres north of Bundaberg.
"Fox Resources continues to consult closely with the Bundaberg and Wide Bay community," executive director Bruce Garlick said.
'No support from either party'
The company has been seeking approval for its MDL application since the previous Labor government initially rejected it in 2022.
When that decision was overturned by the Queensland Supreme Court in September 2023, Fox Resources reapplied.
But a month before last year's state election, the then-minister for state development and infrastructure, Grace Grace, said the application was not in the public's interest.
The Bundaberg community has been vocal in its opposition to the application, including about 75 people at a rally this month.
Bundaberg farmer Judy Plath said she was pleased the state government had confirmed its position.
"Prior to the state election last year, this community had been reassured by both the Labor Party, through Tom Smith, and the LNP, party through Stephen Bennett, that there was no support from either party," she said.
"I went into the state election feeling confident that no matter who won the election, there would be continued opposition to a coal mine on prime agricultural land."
But Ms Plath said she was worried the announcement would not stop a "relentless" Fox Resources.
"If Fox Resources is given yet another opportunity to respond to this decision to put in yet another submission, or to potentially begin yet another round of legal action, that will be very disappointing and frustrating," she said.
