Cao Bang Minerals and Metallurgy Company has been fined VND100 million (US$5,130) for flooding farmland with waste sludge earlier this month.
Nguyen Hoang Anh, chairman of the northern mountainous province, said the government delivered its ruling on Thursday.
Earlier this month, a sludge dike at the company's iron ore mine broke, releasing thousands of cubic meters of sludge into surrounding homes, wells, and rice paddies.
The "red mud" as it's often known killed a number of trees and animals, residents say.
In their latest order, the provincial authorities demanded that the firm clear all the mud from the area by the end of this year.
Anh said the company is working on the clearance and has compensated the affected residents.
"We are testing the environmental impacts of the company's new waste sludge lake which the company spent VND20 billion ($1.03 million) to build to ensure safety for the local area," he said.
Following the incident, local residents have remained worried that the mud contained toxic chemicals.
They say the company has spilled industrial sludge out into the community several times before, and it has, as many times, promised to stop the problem.
Since the mine became operational in the 1990s, a local stream in the area turned red, locals said. Many fish have died as a result.