Coal conversion technologies can help in taking advantage of huge low rank coal reserves by converting those into alternative fuels like methane. In this regard, fungal degradation of coal can serve as a pretreatment step in order to make coal a suitable substrate for biological beneficiation. A fungal isolate MW1, identified as Penicillium chrysogenum on the basis of fungal ITS sequences, was isolated from a core sample of coal, taken from a well drilled by the US. Geological Survey in Montana, USA. The low rank coal samples, from major coal fields of Pakistan, were treated with MW1 for 7 days in the presence of 0.1% ammonium sulfate as nitrogen source and 0.1% glucose as a supplemental carbon source. Liquid extracts were analyzed through Excitation–Emission Matrix Spectroscopy (EEMS) to obtain qualitative estimates of solubilized coal; these analyses indicated the release of complex organic functionalities. In addition, GC–MS analysis of these extracts confirmed the presence of single ring aromatics, polyaromatic hydrocarbons (PAHs), aromatic nitrogen compounds and aliphatics. Subsequently, the released organics were subjected to a bioassay for the generation of methane which conferred the potential application of fungal degradation as pretreatment. Additionally, fungal-mediated degradation was also prospected for extracting some other chemical entities like humic acids from brown coals with high huminite content especially from Thar, the largest lignite reserve of Pakistan.