A State Government report has backed a proposed expansion of the Bradken Foundry at Kilburn in Adelaide.
It says environmental, social and economic impacts of the planned expansion are acceptable.
The project has been opposed by some residents concerned about pollution.
Bradken wants to triple output at the foundry's existing site, while the residents want operations moved further north to Wingfield.
The business says its expansion will create hundreds of jobs.
The State Government says the conditional approval for the expansion will mean reduced noise and increased air quality compared with the existing operation.
It says the assessment has also found that the $40 million expansion will have economic benefits both locally and for the state.
Greens argue foundry should move
SA Planning Minister Paul Holloway says opponents are wrong to suggest that the expanded foundry needs to be moved.
"If the conditions are met by the company it should result in a net environmental benefit to the people of the area," he said.
SA Greens MLC, Mark Parnell, is adamant that the foundry needs to relocate.
"Here is an opportunity that we had to move this polluting foundry out of a residential area and into the cast metals precinct, a special area designed just for foundries," he said.
He says Bradken should be given incentives to move.
"The local council has promised them rate relief," he said.
"There's other things we can do because this foundry would never have been approved if it was to be established today.
"It breaches the planning scheme for the area and it breaches the EPA's own separation guidelines. It's far too close to houses."