Newcrest's Cadia gold mine, about half an hour south of the regional centre of Orange, was warned it risked losing its operating licence on Wednesday after NSW's Environment Protection Authority found the facility's main vent was releasing unacceptable levels of dust.
EPA chief executive officer Tony Chappel said the mine continued to fall well short of its obligations to meet clean air standards and the authority would not hesitate to take further steps to ensure emissions were reduced.
"If Newcrest cannot show its subsidiary is taking immediate action to comply, the EPA will take appropriate action which could include suspension of the licence, seeking court orders or, issuing further directions," Mr Chappel said.
Farmers from the Cadia Community Sustainability Network say the mine, which borders some of their properties, has produced dust since last year.
"The vent emissions are relentless and now that we understand what is in the dust we are very concerned," a spokeswoman from the network said.
"Every day we look to see how bad will today be."
As part of the EPA's response, rainwater tanks of residents will be tested and the ambient air quality will soon be monitored.
A spokeswoman for the mine's parent company Newcrest said the firm took its environmental obligations and the community's concerns seriously.
"(We) will take action to comply with the licence variation notice," the spokeswoman said.
"We are a long-standing member of the community and remain firmly committed to meeting all of our statutory obligations in a way that is aligned with our values."
More needed to be done to remediate affected residents, including possible compensation payments for residents living close to the mine, Greens MP Cate Faehrmann said on Thursday.
"Residents have been living under a cloud of dust from the Cadia gold mine for years, while Newcrest has failed to ensure its operations meet the bare minimum legal requirements to protect human health and the environment," the upper house MP said on Thursday.
Ms Faehrmann suggested the scope of the problem was much larger than what the EPA had responded to.
"Heavy metals including lead are being deposited into the drinking water of many locals and residents are also breathing these poisonous metals while going about their day to day life,'' she said.
"Until it can guarantee the local community that the air is safe to breathe and their water safe to drink, operations at Cadia gold mine must cease."
