As the South African economy relies heavily on its coal resources, these resources should be utilised and managed in the best possible manner. Underground coal gasification (UCG) is one of the leading technologies used where conventional min-ing techniques are uneconomical. UCG delivers gas suitable for synthesis, production of fuels and elec-tricity, or for home usage. The method is perceived as being environmentally friendly and safer than traditional mining. The study summarised in this paper was conducted so as to create a simple model that would allow for the evaluation of UCG process-related costs versus expected benefits in a wider context and under different circumstances. The parameters of the model are: feasibility definition, i.e. maximum possible gas calorific value, based on geological surveys and gasification agents for a pre-defined need; direct process-related costs that are derived from the expected capital and operational expenditures and compared to the value and vol-ume of the gas produced; and assessment of exter-nality costs, i.e. the indirect economic value of envi-ronmental, safety and health benefits. The external-ities concept should encourage governmental agen-cies to consider further investment in UCG technol-ogy as a vehicle for delivering, potentially, high sav-ings in terms of the reduction in the costs of envi-ronmental damage resulting from gaseous emis-sions into the atmosphere, specifically expenditure on national health.