The item was found in the river, near Denison Bridge, by a local fisherman at about 1pm on Sunday.

Officers from Chifley Police District were called in to secure the area and keep the public away until the Australian Defence Force could attend the scene.

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The grenade was described by police as "very rusted and corroded" and it appeared "to have been in the water for some time".

Chifley PD duty officer acting Inspector Peter Foran said ADF staff attended overnight, took possession of the device, and safely destroyed it at about 6am on Monday morning.

A spokesperson for the ADF said the grenade was deemed unsafe for transport.

"Defence can confirm a Second World War era 36M grenade was located in Kelso, New South Wales on January 10, 2021," they said.

"The item was assessed by Defence, and due to its poor condition was deemed unsafe for transport.

"[On Monday] a Defence Explosive Ordnance Operator moved the item a short distance to a safe location where it was disposed of in situ by demolition."

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Acting Inspector Foran said the incident was a reminder to the community that people need to contact the police if they ever come across something suspicious.

"The message is if people find suspicious devices, be aware that it could still be active to some extent, so call the police and leave the device where it is," he said.

The ADF spokesperson echoed his comments.

"If a member of the public finds a suspicious item, such as unexploded ordnance, or has any already in their possession, they should not touch or disturb it," they said.