The Government is moving urgently to clean up the Tui Mine and remove what is considered a potential risk to Te Aroha, south of Paeroa, in the event of an earthquake.
It has reached agreement with the Green Party to spend $9.9 million more on cleaning up and stabilising the mine's tailings dam.
Environment Minister Nick Smith says the site is the most contaminated in New Zealand.
In addition, a geo-technical report completed last year revealed it posed a real danger to Te Aroha, he said.
"There is a high risk in the event of quite a moderate earthquake of it liquifying and that 160,000 tonnes of toxic material tearing down that steep mountain and doing significant damage to the township of Te Aroha."
Dr Smith said that would would involve potential loss of life and damage of over $30 million.
In total, the Government will spend $15.2 million cleaning up the Tui Mine, while the Matamata-Piako District Council and Waikato Regional Council will jointly contribute $1 million.
The mayor of the Matamata-Piako district, Hugh Vercoe, says something has to be done to clean up and stabilise the mine's dam.
"If there was an earthquake to destroy the dam wall
in the front, that whole lot would slide down the mountain, would go into the Waihao River and finish up in the Hauraki Gulf. That's a major problem for anybody, so let's deal to it so that it's stabilised."
Those in charge of cleaning up the site hope to be finished within two years.
As part of the deal with the Greens, the Government has also announced a new national environmental standard on contaminated soil.
Green Party environment spokesperson Catherine Delahunty says it is important there are nationwide rules to manage toxic sites.