The PNG Environment Director issued the permit to Crater's wholly owned PNG subsidiary Anomaly Ltd and Crater said it was an important milestone towards the development of the HGZ project.
The mining lease application was registered in May following a work programme incorporating underground development and diamond drilling at HGZ.
With the environment permit now issued, Crater said the mining lease would be tabled for discussion at a PNG Mining Advisory Council meeting this week.
Crater proposes to begin small scale underground mining with target production of about 10,000oz gold during the first year of operation.
Mineralisation is confined to numerous narrow, highly oxidised veins trending roughly north-south with several cross cutting east-west structures.
Crater said development and drilling had shown the junction of these structures was favourable for "bonanza grades of coarse free gold up to 847 grams per tonne (27.2 ounces per tonne)".
Detailed mine planning is being undertaken following interpretation of all the development and results.
Gold extraction will be by means of simple gravity concentration and some development has already begun, including the commissioning of a milling and gravity concentration circuit.
While the company is looking to the HGZ for early production, Crater hopes to increase the current JORC compliant resource of 24Mt at 1.0g/t gold for 790,000 ounces at the mixing zone project at Crater.
Crater Gold CEO Greg Starr said: "We are excited to have taken another step forward towards becoming a gold producer.
"The issue of the Environment Permit now clears the way for the PNG Mining Advisory Council to recommend to the mining minister that the mining lease be granted to Anomaly Ltd," he added.
"Subject to the grant of the mining lease, we are well positioned to fast track mining activities, thereby generating cashflows and further fund advancement of our Crater Mountain assets."