The operator did not have time to activate the fire suppression system and the cabin was destroyed.

The NSW Resources Regulator said the position and extent of the fire indicated catastrophic engine failure, potentially caused by ruptured fuel or oil lines outside the engine envelope.

"The fire propagated forward towards the fuel tank, with evidence of significant heat around the main boom pivot," it said.

"The excavator recently underwent a major overhaul."

It may well need another.