The NSW Environmental Protection Authority (EPA) fined the Cadia Valley Operations gold mine near Orange $15,000 for dust pollution in April.
It is the largest fine the authority is able to issue under its legislation.
EPA director of regulatory operations Cate Woods said Cadia Valley Operations had failed to maintain an effective coverage of a dust suppressant at two facilities.
"An investigation into resident complaints on 19 April found the dust had blown from the company's northern tailings storage facility," she said on Thursday.
"The EPA has received numerous notifications by residents of dust lift events visible from their homes."
Before 2018, wet tailings had been deposited at the north and south facilities, but that was stopped after a dam wall separating the two facilities suffered a catastrophic failure.
That led to the tailings in the facilities drying out and the resulting dust lift events that concerned people living south and southeast of the site.
"Cadia Valley Operations must do better to manage their impacts on the surrounding community if they want to avoid an escalation in regulatory action by the EPA," the watchdog said.
Courts can impose larger penalties for more serious incidents that are escalated legally.
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