Conservationists warned one of the Australian sea lions' biggest breeding colonies may be under threat as authorities claimed it was "extremely likely" the deadly strain was spreading locally.
Eleven suspected bird flu cases have been discovered in South Australia including one near the critical Seal Bay colony on Kangaroo Island.
The area is a key habitat for Australian sea lions which are endangered with a population of just 12,000.
"These new detections mean local transmission in native wildlife is now highly likely, and puts the endangered Australian sea lion at real risk of extinction," Australian Marine Conservation Society said.
Conservationists fear bird flu could devastate the Seal Bay colony which is home to about five per cent of the global population.
"This is the news we feared but predicted given the experience of bird flu internationally," the society's Alexia Wellbelove said.
"The Australian sea lion simply cannot absorb the kind of losses we have seen bird flu inflict on marine mammals overseas."
In South America, 30,000 sea lion pups had been killed by the virus in just six months following transmission from birds to marine mammals, she said.
"With a positive bird flu detection at this important colony, we now have to face the very real possibility of similar devastation here at home, in a species already teetering on the edge," Ms Wellbelove said.
A sick greater crested tern found near Seal Bay was "deeply concerning" news, the Invasive Species Council said.
"It brings the virus to the doorstep of one of Australia's most important Australian sea lion colonies," the council's James Johnston said.
'While this detection is in a greater crested tern and there is currently no evidence the virus has spread to sea lions, its proximity to such a significant seal colony highlights how quickly this disease is moving through wildlife."
Authorities are waiting on further analysis to establish whether there has been a local transmission of the virus, with results due on Thursday.
There are 27 confirmed H5 bird flu detections in Australia across SA, Western Australia, NSW and Queensland to date.
All have been wild seabirds found in coastal locations.
However, SA Primary Industries Minister Clare Scriven said a localised distribution of the virus was extremely likely.
"What we've seen around the world is we can't stop H5 bird flu and there has of course, in every other continent around the world, been local transmission," she told reporters in Adelaide on Wednesday.
"So it was pretty much inevitable that it would occur.
"We'll wait for the scientific definitions to say whether we are considered to be at that point now but certainly if we're not it's likely that it will be quite soon."
On-beach tours at Seal Bay have been temporarily paused in a bid to protect the sea lion colony, Ms Scriven said.
"Less human interaction means that there's higher levels of resilience to all diseases or all threats and risks to the Seal Bay population," she said.
However guided tours along Seal Bay Conservation Park's boardwalk will continue, with more rangers sent to Kangaroo Island to help.
"We know the Seal Bay experience is incredibly valuable to so many people and that will be able to continue, just not on the actual beach itself," Ms Scriven said.
There have been no detections of H5 bird flu in poultry, captive birds, or pets and other wildlife or livestock and no evidence of any mass mortality events to date.
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