"The Dick Dastardly bit about cyanide comes from spy movies and hangover from the Second World War," says Unity Mining's managing director, Andrew McIlwain. "It's potentially toxic, but handled and managed in the right scenario, it is very safe."

As for pollution during earthworks on the new mine, Mr McIlwain said that was not Unity's finest hour. "We have taken our 40 lashes and paid our fines. It is not something we are very proud of, but circumstances were quite different," he said.

Unity originally said ore would be trucked off site and processed at Parkes, but this week suggested building a plant for cyanide processing near Majors Creek to separate gold from ore.

The announcement has alarmed downstream food producers and Eurobodalla Shire, which wants to keep its water catchment for 140,000 people in summer in pristine condition.

Downstream landholder Jackie French said final processing of ore at Majors Creek introduced a new risk from lead, cadmium, zinc and dust, which was potentially worse than cyanide.

Araluen Valley Protection and Producers Coalition president Penny Hayman said she was stunned.

"We have seen [Unity's] share price go down and knew there would be some sort of change, but didn't really expect them to go this far."

Ms Hayman said within two weeks of mine construction, Unity had polluted Spring and Majors creeks. The Land and Environment Court ordered Unity to pay $196,000 in penalties and costs, including to the Upper Deua Catchment Landcare Group.

"It is ironic that when our landcare group was awarded money because of these breaches, they are proposing something infinitely more dangerous," Ms Hayman said.

Eurobodalla Shire's director of infrastructure services, Warren Sharpe, said Majors Creek flowed into Deua and then to Moruya Rivers, one of the shire's three main off-takes from where water was pumped to a creek near Batemans Bay and serviced the entire shire of 40,000 people in winter and 120,000 in summer.

Concerned about chemical processing and rock extraction, Eurobodalla challenged NSW Planning's first approval for the mine, only withdrawing after significant modifications were made for better water-supply protection.

"[Unity] is introducing a process where we are keenly interested at looking at what is being proposed because there's a new risk being introduced into the catchment," Mr Sharpe said.

"They are doing their environmental assessment at the moment and we will be going through those with a fine-tooth comb for sure."

Palerang mayor Pete Harrison said the cyanide proposal worried the community because Unity had previously ruled this out.

"My professional background is as a chemist. I understand why people react to it. I am not as concerned as some people might be about the whole thing," Cr Harrison said. "Where the facility exists there's a risk and where the facility doesn't exist there isn't; it is as simple as that."

Mr McIlwain said instead of 2200 trucks a eyar carrying ore through Braidwood to Parkes, six trucks would deliver the cyanide in briquettes contained in a cylinder built within a shipping container.

"Before the solution leaves the processing facility, it is chemically destroyed and brought down to quite safe levels and discharged to a tailings facility. It breaks down under ultra-violet light. It breaks down over time and it doesn't bio-accummulate. It is not like a heavy metal in the food stream," Mr McIlwain said.