PNG Minister for Mining Byron Chan signed off on the mining lease after a rigorous technical and environmental assessment process.
Crater CEO Greg Starr described the approval as a watershed milestone for the company.
"With the mill and gravity concentration circuit already commissioned on site, we can effectively commence mining activities and gold production in the current quarter," he said.
"The company is currently finalising a Landowner Compensation Agreement to clear the way for gold production.
"Cashflows generated will assist in developing our other Crater Mountain prospects."
The broader Crater Mountain project in the Eastern Highlands province is a former BHP Billiton tier-one asset with an inferred resource of 790,000 ounces of gold.
Crater expects the HGZ to produce around 10,000oz at cash costs of $A394 an ounce in the first 12 months of operation.
Shares in Crater gained 3.6% to 14.5c.