One of the largest gold mines in the world has been told it must comply immediately with clean-air laws or risk further action, including licence suspension and court orders.
The New South Wales Environment Protection Authority has announced the main air vent at Cadia Valley Operations (CVO) near Orange is releasing an "unacceptable level of dust".
EPA chief executive officer Tony Chappel said the mine continued to fall short of its legal obligations to meet clean air standards.
"We require the mine to take all necessary steps to ensure dust emissions are significantly reduced and this may include a reduction in production," Mr Chappel said.
"If [operator] Newcrest cannot show its subsidiary is taking immediate action to comply, the EPA will take appropriate action which could include suspension of its licence, seeking court orders, or issuing further directions."
The company has been issued with a variation issued to its licence, with new conditions designed to address concerns about air quality.
It must now regularly monitor vent emissions, provide a monthly report on dust discharge from one of its main vents and prepare additional reports on lead dust fingerprinting research, analysis of dust impacts and sources.
The EPA has also asked CVO to update its Air Quality Impact Assessment and carry out work to manage dust underground.
"We know this is strong action, but we will not shy away from doing what we must to prioritise human health and the environment," Mr Chappel said.
CVO has issued a statement in response to the EPA's latest action.
"We take our environmental obligations and the concerns raised by the EPA seriously and will take action to comply with the licence variation notice.
"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."
In May, the EPA issued a final prevention notice to CVO after residents presented the EPA with test results showing elevated levels of lead, nickel and selenium in their blood.
Heavy metals were also found in people's rainwater tanks.
CVO has until July 14 to review its operations and provide a plan showing it can conduct its mining operations in a way that complies with the legislation.
"We've been working closely with the community and recently begun household rainwater tank testing for residents and are in the process of implementing a comprehensive ambient air monitoring program," Mr Chappel said.
"We will continue taking all necessary steps to ensure residents are confident their health is being protected."