The Integra underground coalmine near Singleton has been ordered to immediately stop operations and evacuate workers after concerns were raised about unsafe levels of methane.
The Department of Trade and Investment issued the order to cease work until further notice while investigations get under way, after it was "made aware of unsafe methane levels".
The mine, which is believed to employ up to 280 people, is operated by Vale Australia.
Construction, Forestry, Mining and Energy Union northern district vice-president Robin Williams said last night he was seeking information from a union safety officer about the latest development.
But he was aware that the mine had experienced problems with ventilation and other matters over the past few weeks while it moved its longwall.
Longwall mining involves cutting a long panel along a seam.
"No doubt closure will have significant financial implications [for the mine] but it was already experiencing some difficulties," Mr Williams said.
Resources Minister Chris Hartcher said the department was working with the operator, the union check inspector, the mine's occupational health and safety committee and a site check inspector to "investigate and resolve allegations of health and safety issues at the mine and restore the mine to full operations".
Some essential employees had been permitted to enter for inspections and pumping operations.
"I have requested a detailed report on this issue and will continue working with the department and mine operators to reach a satisfactory outcome," Mr Hartcher said.
He said the government supported the closure of the mine and considered the safety of workers was paramount.
A spokesperson for Integra could not be reached last night.