The loss of water from mining under the Woronora catchment is "negligible", a report by an independent expert panel says.
The panel also said there was no evidence mining was causing water quality standards to be compromised in the Special Areas - which the public is not allowed to enter - around Sydney dams.
Planning and Public Spaces Minister Rob Stokes released the final report of the Independent Expert Panel on the impact of mining activities in the Special Areas of the Greater Sydney Water Catchment.
Mr Stokes said the report would inform the future of mining in the catchment.
"The panel made 50 detailed recommendations which the NSW Government will review and respond to in due course," he said.
"In the interim, no new development applications for mining in the Special Areas will be determined."
Applications on hold include a proposed extension of long wall coal mining under Woronora Dam by Peabody Energy subsidiary Metropolitan Coal.
Photos published by The Sydney Morning Herald in August this year showeddiscoloured water in the Eastern Tributary of the Waratah Rivulet, leading to Woronora Dam.
Sutherland Shire Environment Centre and other groups said water was seeping into bedrock cracks, releasing metal contaminants such as iron, manganese and aluminium, which was turning the water orange and green.
A petition to block the proposal attracted thousands of signatures.
The independent panel found current mining activities that impact on the Greater Sydney Water Catchment may result in water loss of up to 8 ML/day.
This compared with previously reported losses of up to 820 ML/day in natural evaporation and environmental flows.
"Losses of water from the Woronora Special Area due to mining impacts associated with Metropolitan Mine are negligible, with a water make between 2009 and 2017 that has averaged at 0.09 ML/day and, with the exception of May 2011, a 20 day average water make below 0.5 ML/day," the report said.
The report said water losses from mining in the Southern Coalfield, which extends from the Woronora catchment through the Illawarra, were low compared to other components of Greater Sydney's supply and demand.
"For example, 8 ML/day [loss] compares to the Sydney Desalination Plant capacity of approximately 250 ML/day and estimated leaks from the Greater Sydney supply infrastructure of approximately 130 ML/day," the report said.
On the issue of water quality, the report said, "Although surface fracturing elevates metal loads in watercourses, there is no evidence that mining in the Special Areas is currently compromising the ability of WaterNSW to meet raw water supply agreement standards".