(Adds background in paragraphs 2-5, details from EPA in...

(Adds background in paragraphs 2-5, details from EPA in paragraphs 6-8)

June 30 (Reuters) - Newcrest Mining Ltd's (NCM) Cadia mine in Australia's New South Wales (NSW) has adjusted its operations to significantly reduce production of dust, the state's Environment Protection Authority (EPA) said on Friday.

Cadia, Newcrest flagship goldmine, has been under investigation by the EPA after testing of residential rainwater tanks identified heavy metal contamination. Further testing of kitchen taps by the state's health ministry had found the water met guidelines.

Newcrest is currently the subject of a A$26.2 billion ($17.33 billion) takeover offer from Newmont Corp NEM.N .

Last week, the EPA demanded that Cadia take immediate action to address "unacceptable level of dust" emanating from the mine's main vent, or risk appropriate action, which could include a suspension of its license and court orders.

"We required immediate action from Newcrest's Cadia mine and they have responded with significant changes but there is still more work to be done," said EPA Chief Executive Officer Tony Chappel.

As part of its ongoing investigations and monitoring of the Cadia mine, an independent panel of experts has been appointed by the NSW EPA to provide advice, the EPA said.

"Panel members will provide advice on sampling, testing and monitoring to understand the extent, impact and potential of pollutants making their way into the Cadia Valley community," Chappel said.

($1 = 1.5115 Australian dollars) (([email protected]; Twitter: https://twitter.com/damnit_saladin;))