The Pollution Adjudication Board said Rapu-Rapu Processing Inc., owned by Lafayette Mining Inc., violated local laws when it discharged waste water with a high cyanide content into creeks on Rapu-Rapu island, southeast of Manila.

The board also upheld the suspension of the Australian company's operations imposed after water from the mine's tailings pond overflowed in October.

Lafayette officials earlier said the company made a "normal discharge" of water after processing it to remove the cyanide, the main chemical used to extract gold from the crushed ore.

The company had denied the contamination claims but said it would investigate the matter.

The modest-sized gold, silver, copper and zinc mine is only the second foreign-financed mining project to reach production stage in the Philippines in a decade.

Philippine President Gloria Arroyo is pinning her hopes on massive foreign investment in the resources sector to reduce poverty, but leftist and environmental groups are opposing the entry of foreign capital.