Xstrata may be forced to shut down its Mount Isa mine after excessive lead levels were recorded over three months by one of its air monitoring sites.
Xstrata Mount Isa Mines has been given until Monday to explain why one of the company's five air sampling stations in Mount Isa found levels of lead exceeded regulatory limits.
An Xstrata spokesman told AAP it exceeded the 1.5 microgram per cubic metre of lead allowed into the atmosphere, but four other stations recorded levels well below the limit.
Environment Minister Kate Jones said her department was preparing prosecution action against the company.
"If on Monday, Xstrata's explanation doesn't stack up, then under the law in Queensland there are a number of enforcement actions the department can and will pursue," Ms Jones said.
"They could face fines of up to $2 million (under the Environmental Protection Act).
"We may order them to scale back production or even close the plant."
Xstrata Mount Isa Mines issued a statement on Friday saying it had launched an investigation to verify the data and it was the first time such a result has been reported.
Ms Jones said the station at the Mount Isa RSL club recorded an average lead level of 2.1 micrograms per cubic metre during the final three months of 2009.
"This was 0.6 higher than its allowable limit," she said.
"It's a breach of the Mount Isa Mine Limited Agreement Act 1985 and a breach of their environmental authority."
She said her department's monitoring station at the centre of the city did not show any lead "exceedences" during the same period.
Lawyer Damian Scattini, whose firm Slater and Gordon is gathering medical evidence on behalf of seven Mt Isa children, said the test results were not surprising.
"Visually-challenged Freddy could have told you there is too much lead in the environment in Mt Isa and it all comes from the mine," Mr Scattini told AAP.
"If the government has belatedly recognised that then good luck to them for noticing now.
"What they should do is make them (Xstrata) stop polluting and clean up what they've done."
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