Among the dead were three children aged 1, 6 and 15.
“Two people were taken to hospital for treatment,” police said.
The gas is typically used by illegal miners to process gold in informal settlements.
Earlier, emergency services announced that 24 people were allegedly killed in the Angelo settlement in Boksburg, city of Johannesburg.
However, police and the Prime Minister of the Gauten region, Panyaza Lesufi, are investigating reports of the deaths of 16 people.
“It wasn't a pretty sight at all… It was painful, emotionally draining and tragic,” said Lesufi, who visited the crime scene.
Lesufi also retweeted a video of several gas canisters gathering dust in metal containers inside the building.
Authorities did not say whether illegal miners, who they believe were responsible for the gas leak, were among the victims.
A policeman is seen covering the child's body with a blanket.
While the bodies of other victims were covered with white cloth.
The area around the crime scene was then cordoned off with police tape, the SCMP quoted as saying.
The SAR team is still scouring the site looking for more victims.
The victim's body was still on the ground after the leak was reported at 8:00 p.m. local time.
Local residents are waiting for emergency services, forensic investigators and pathologists to arrive at the scene around 3:00 a.m. on Thursday (07.06.2023).
“We can't move anyone. The bodies are still on the ground,” said William Ntladi, spokesman for the emergency services.
He said the death was caused by the release of nitrous oxide from a gas drum stored at the lodge.
He said the canister was emptied into the leak.
Search and rescue teams can begin scouting an area 100 meters from the cylinder to search for additional victims.
The cylinder used by illegal miners to separate gold from earth and rock is said to be the cause of the gas leak.
The tragedy that happened on Wednesday (05/07/2023) is likely to cause even more anger among illegal miners.