The water warning was issued for South Brook by the Environment Department on Monday because of a ruptured dam around a tailings pond at a former copper mine.
Environment Minister Tom Hedderson says it could take days or weeks for copper and zinc from the pond to travel downstream.
The province says an excavator was attempting to remove a boggy area at the bottom of the dam at the old Gullbridge mine when the leak happened.
Hedderson says there are factors that help protect the town's water supply, including the fact it is 26 kilometres away from the dam and a nearby bog is absorbing some of the materials.
But Hedderson says there's also a salmon river running through the area, which will have to be tested.
Engineers are looking at ways to repair the breach.
The town's 500 residents are being told they can't use their water for cooking, washing food, brushing teeth or making juices, baby formula and ice.
Mayor Paul Mills says residents are using water brought in by the municipality. It's available at the town hall.
He said arrangements have been made for an ongoing supply of water until the dam is repaired.
Officials say it's safe to use the water, which comes from the South Brook River, for bathing, washing clothes and dishes.
The department has said no contaminants have been found in the town's drinking supply.
The town is on the Trans-Canada Highway, halfway between Deer Lake and Grand Falls-Windsor.