An overwhelming majority of about 400 submissions to the NSW Planning and Environment Department, including from government agencies, objected to the proposal.

Most objectors, including Eurobodalla Shire Council and specialist scientists, believed cyanide waste in a huge tailings dam above the South Coast's water catchment would find its way into the drinking catchment for up to 100,000 people.

Majors Creek Catchment Guardians president Matt Darwon is overjoyed at the withdrawal.

"It was the only way to go. I am very happy, thankful everybody pulled together. We were resolved that this was not right, I think it is a great outcome. It didn't have community support."

Mr Darwon has vowed to target the NSW Government's initial approval of the mine, saying it too was based on flawed data.

The decision is too late for Araluen orchardist Robyn Clubb who ripped out 25,000 peach trees out of her orchard last month. The risk of a cyanide spill upstream was the last straw for the orchardist, who previously battled supermarkets, poor seasons and uncertainty.

Author and downstream resident Jackie French said four years ago she was prepared to give the miners the benefit of the doubt. But pollution in Majors Creek and the cyanide proposal had angered her.

Now Ms French is relieved, but angry she has lost so much time writing submissions fighting the mine, when she could have been writing children's books. "This was a stupid project, a tragedy," Ms French said.

Former chief research scientist with the CSIRO Dr Emmett O'Loughlin said last month the tailings dam's design was seriously flawed.

Dr O'Loughlin said data in an environmental assessment to support modifying the mine underestimated rainfall and overestimated evaporation.

Rainfall data used to calculate monthly inputs to the tailings dam, claimed by Unity Mining to be from Braidwood Weather Station, were incorrect and significantly different from rainfall statistics published by the Australian Bureau of Meteorology, Dr O'Loughlin said.

As well as withdrawing the application to modify the mine, Unity's chief executive Andrew McIlwain, has resigned. Mr McIlwain had previously assured the community cyanide would not be used, but later said it was not dangerous in mining operations.

In a statement on Tuesday, Mr McIlwain said: "In light of the volume and intensity of opposition and the significant length of time involved with the required regulatory processes for this, withdrawing the plan for cyanide use is the right thing to do.

"In most part we'll be reverting back to the originally approved development plan, so we're continuing to assess a range of off site processing options. We will, however, continue to seek approval for the relatively minor modifications in the application," he said.

"It's still a viable project and will deliver significant benefits to the local community and economy. Unfortunately, I won't be at the helm to see the project to fruition," said Mr McIlwain.

Unity Mining's non-executive chairman, Clive Jones, thanked Mr McIlwain for his hard work.

"During his tenure he's overseen the strong production and operational performance of the Henty Gold Mine in Western Tasmania and a significant turn-around in the company's financials," Mr Jones said in the statement.

The miner wanted to expand the tailings dam from nine to 16 hectares. Concerns of heavy rain washing pollutants downstream arose earlier after Unity pleaded guilty in the Land and Environment Court to polluting Spring and Majors Creek three times in 2013.

Unity had failed to install adequate sediment and erosion controls and was ordered to pay $103,000 for creek restoration work.