Fair Day, the rampant rainbow extravaganza headlining the first weekend of Sydney Mardi Gras, has been cancelled due to concerns over asbestos-tainted mulch.

More than 70,000 people were expected to descend on Victoria Park on Sunday for the day-long night festival.

But the discovery of recycled mulch contaminated with mulch this week, and the lengthy process to remove it, put paid to the marque Mardi Gras event.

“It breaks our heart to see this Sunday not go ahead, but given the safety concerns, we must put our communities’ well-being first,” Mardi Gras chief executive Gil Beckwith said.

“This cancellation is a setback. However, it presents us with an opportunity to unite and support one another more strongly.”

Bonded asbestos was found in mulch at Victoria Park on Monday night after the Environment Protection Authority found a link to a known supplier deep in the supply chain of one of the City of Sydney’s contractors.

More dangerous friable asbestos was also found in another central Sydney park, the latest in a string of detections across the NSW capital since bonded asbestos was uncovered at Rozelle Parklands in Sydney’s inner-west on January 2.

Further discoveries are possible. From Wednesday, the City of Sydney was testing of another 32 parks where it believed a contaminated mulch product may have been used.

Lord Mayor Clover Moore said the decision to cancel Fair Day underscored the seriousness of the find.

“The NSW government and the EPA must make sure this never happens again,” she said.

“Fair Day is a pivotal part of the Mardi Gras calendar. But we have to put the safety of our community first.”

Greenlife Resource Recovery, the supplier linked to most – if not all – of the contaminated sites scattered across Sydney, denies its mulch was contaminated when supplied.

The company on Tuesday said its testing showed mulch stockpiled at its facility was free of asbestos contamination.

It has launched an appeal against a prevention notice issued by the NSW EPA after the watchdog determined it supplied the mulch used at Rozelle.

Ross Fox, a lawyer representing Greenlife, said the company was “at risk of being made a scapegoat for failures in a complex supply chain for construction and landscaping projects”.

More than 100 sites across Sydney have been tested. There have been at least 13 positive results for bonded asbestos.

The EPA probe has grown to involve 120 investigators, who are working to trace the supply of mulch.

– AAP