The suspension of the Minas Conga gold and copper project, majority owned by Newmont Mining Corp. (NEM), has raised risks for Peru as mining companies look to invest some $50 billion there this decade.

Late Tuesday, Minera Yanacocha SRL, South America's biggest gold producer, disclosed that it was suspending the $4.8 billion Conga project following days of increasingly violent protests that have left some 20 people injured as a result of clashes between demonstrators and police.

Protesters had called for the cancellation of Conga over concerns about its proposed use of water, which involved draining four lakes and building reservoirs.

Newmont Mining Chief Executive Richard O'Brien said Wednesday that the company will continue to seek peaceful dialogue with communities in the Cajamarca region, where Conga is located, as well as with government officials to advance the project.

O'Brien added, however, that "should we be unable to continue with our current development plan at Conga, the scale and diversity of Newmont's global portfolio provides us with flexibility to reprioritize and reallocate capital to maintain focus on our strategic objectives through development alternatives in Nevada, Canada, Ghana, Indonesia and Suriname."

Compania de Minas Buenaventura SAA (BVN, BUENAVC1.VL), which has a 43.65% interest in Conga, said it believes Yanacocha should continue to work to receive community approval.

"Suspending construction activities in Conga does not mean that we do not believe in the project. We think this is the best thing we can do for the people in Cajamarca and for the country," Buenaventura Chief Executive Roque Benavides said in a statement.

Conga was scheduled to begin production in 2015. A company executive, who asked not to be named, said at this point it is unclear if the start date will need to be pushed back.

Conga's average output during the first five years of production would be 580,000 ounces to 680,000 ounces of gold and 155 million to 235 million pounds of copper.

The dispute has exposed a rift within President Ollanta Humala's administration, which took office in late July with promises to resolve conflicts affecting natural-resource projects. Two high-level government officials have left their posts, including Jose de Echave, deputy minister for environmental management.

De Echave criticized the administration's handling of the conflict and said the current process for approving environmental permits is outdated. Conga's environmental-impact study was approved in October 2010 by the administration of former President Alan Garcia.

Yanacocha said the decision to halt the project was necessary to reestablish dialogue and recover trust with local communities, while Prime Minister Salomon Lerner said it is now up to protesters to "accept dialogue and negotiation instead of violence."

Social conflicts have already delayed a number of projects worth billions of dollars in Peru, the world's second-biggest producer of copper and silver, and a major producer of gold, lead, zinc and other minerals. They also threaten some $50 billion in expected investment this decade.

Conga is the fourth project to be delayed this year as a result of community opposition. Other projects include those owned by Southern Copper Corp. (SCCO, SCCO.VL), Bear Creek Mining Corp. (BCM.V, BCEKF) and Anglo American PLC (AAL.LN, AAUKY).

Daniel Mori, an analyst at brokerage Inteligo SAB, said Conga's suspension is "definitely a call to alert for important projects in [the Peru] portfolio."

Celfin Capital's research manager, Cesar Perez-Novoa, said that, while the suspension was necessary to ease tensions in Cajamarca, it does set a "very bad precedent," given that Conga is the country's biggest project.

Luis Zapata, the head of institutional equity sales for Canaccord Genuity, said Peru will become less attractive for mining companies if the new government is unable to resolve the disputes.

Any hobbling of Peru's mining sector would directly affect the Andean nation's broader economy. Mining has been the lynchpin of Peru's high economic growth for several years running. The sector accounts for about 60% of Peruvian exports and 30% of the government's tax collection.

-By Ryan Dube, Dow Jones Newswires; 51-945 043 802; peru@dowjones.com