The approval comes with 36 conditions to guard against negative effects from radiation and other factors.
Wiluna would become Australia's sixth uranium project but the first in Western Australia. While Australia's uranium output represents just more than 10 percent of global production, the country has the world's largest uranium inventory with one-third of known recoverable resources.
"Wiluna is the first new Australian uranium mine since mid 2009 to receive federal and state government approval," Toro Managing Director Vanessa Guthrie said in a statement.
Wiluna was granted environmental approval by the Western Australian government last October. Together, the state and federal approval process has taken nearly 3 1/2 years.
"Completion of the environmental approvals delivers Toro the regulatory certainty needed to fully underpin our negotiating capacity and to now advance commercial financing arrangements and product off-take agreements with potential partners," Guthrie said.
She said the approval also provides "a clear pathway" to complete detailed engineering design, infrastructure and cost estimates for Wiluna.
Federal Resources Minister Gary Gray told the Australian Broadcasting Corp. he expects Wiluna to have a mine life of more than 10 years and to process more than 1 million tons of ore annually and around 750,000 tons of oxide.
Gray also said the project would be a "major job creator."
Uranium prices have fallen considerably following Japan's Fukushima nuclear power plant disaster in March 2011. The recent spot price, which is generally lower than contract prices, was $42.25 a pound, compared with Toro's estimated cash operating costs of $37 a pound, The Australian reports.
Australian Prime Minister Julia Gillard, visiting India last October, said Australia is ready to sell uranium to India.
Federal Environment Minister Tony Burke said the 36 environmental conditions would guard against "any negative impacts from radiation or to groundwater and surface water, and include precautions to ensure that once the mine is closed, the site is safe for humans and animals, and is non-polluting," Business Day reports.
Under Toro's plan, yellow cake, or milled uranium oxide, will be trucked to port in Adelaide, ABC reports.
But Western Australia's Conservation Council warns that transporting radioactive loads could pose a significant threat to remote areas.
There's been no consultation with those communities about the mine itself or about the transportation route," says Mia Pepper of the council, adding that local services would not be able to cope in the advent of an emergency.