CARRIZALILLO, Mexico (Reuters) - Heroin traffickers linked to the abduction and disappearance of 43 students a year ago are battling over millions of dollars paid by Canadian mining giant Goldcorp to a village in Mexico’s southern gold belt, leading to a wave of murders.

Soldiers guard an area near clandestine graves at Los Casahuates, on the outskirts of Carrizalillo, Mexico, November 12, 2015. REUTERS/Henry Romero

As a signatory to a Conflict-Free Gold Standard drawn up by the World Gold Council industry group, Goldcorp G.TO commits to extracting the precious metal in a manner that "does not fuel unlawful armed conflict or contribute to serious human rights abuses."

But residents of Carrizalillo in the impoverished state of Guerrero say the some $3 million a year in rent paid by Goldcorp for their land, which the mine is built on, is fuelling a bloody feud between two rival cartels.

Village authorities say the company is not doing all it can to protect them.

The violence highlights an ethical quagmire for industries operating in Mexico’s drug badlands and raises questions of whether companies could do more to ensure safety for people connected to their operations.

In response to Reuters’ questions, Goldcorp said it has held numerous meetings with authorities to seek better security outside the mine’s perimeters, in line with obligations under the standard.

“Even though we can and do advocate with local authorities for the respect of human rights in the vicinity of our operations, we cannot take on the role of government,” said Michael Harvey, Goldcorp’s Latin America director for corporate affairs and security.

Authorities describe a struggle between two gangs - “Guerreros Unidos” and “Los Rojos” - over the mineral wealth that has split Carrizalillo into two factions, fanning chaos.

Each side accuses the other of supporting a rival cartel with the alleged backing of different state and federal security forces. At least 26 people have been killed since the feud escalated in mid-2014.

Last month, within sight of Goldcorp’s Los Filos pit in the green hills and scrub around Carrizalillo, the remains of at least eight alleged cartel victims were found in clandestine graves.

Some homes in Carrizalillo are scarred with bullet holes and broken windows after a series of assaults in the past year, some involving dozens of masked men firing automatic weapons.

“The wealth Carrizalillo generates is fought over by these two groups,” Federal Police Commissioner Enrique Galindo told Reuters, adding that the mine’s riches have exacerbated a struggle for control of drug trafficking routes.

Villagers describe systematic extortion by both cartels.

Initially, Los Rojos were dominant, “taxing” mine workers, contractors and the landowners that Goldcorp pays rent to, as well as exerting influence over mine unions, the village council and a landowners’ cooperative paid by the mine, former residents say.

Last year, Guerreros Unidos gunmen blasted into the village, killing four and terrorizing residents for months. That cartel’s rule was ended by a crackdown in October 2014 and since then the factions have fought with a series of tit-for-tat killings.

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“They want to take advantage of the fact there is money in Carrizalillo. They want money that is ours,” said Nelson Figueroa, who heads the village council since July.

His faction blames Guerreros Unidos and villagers aligned with the gang for the bloodletting, with the backing of members of federal security forces.

Other sources say a member of Figueroa’s faction, Ricardo Lopez, the head of a cooperative that manages land revenues paid by Goldcorp, is aligned with Los Rojos. Lopez and Figueroa deny the claim.

Members of the gangs - both former subsidiaries of Joaquin “El Chapo” Guzman’s powerful Sinaloa cartel - face U.S. charges of trafficking heroin from Guerrero, where poppy gum has replaced the famed “Acapulco Gold” marijuana as a top export.

The Guerreros Unidos gang is the primary suspect in the disappearance and apparent murder of 43 students last year, although international experts differ with Mexican officials on the degree of involvement of state and federal authorities.

The case drew international attention and fierce criticism of President Enrique Pena Nieto’s government.

It is less well-known that an hour’s drive south from the city of Iguala, where the students were abducted, the cartels have turned their attention to gold.

CONFLICT-FREE?

Villagers welcome the wealth generated by the mine and have negotiated to maximize their benefits. Protests closed the mine for a month last year until Goldcorp agreed to more generous terms.

Landholders say that under that May 2014 deal, Goldcorp pays the equivalent of 4 ounces of gold per hectare in rent to 175 landholders and a communal land fund - an estimated $3 million a year at today’s prices.

That is a small fortune in a village of around 1,000 people.

Goldcorp declined to comment on payments. Under the conflict standard, drawn up in 2012 to help members comply with U.N. guidance on human rights, signatories commit to not making payments that fuel unlawful armed conflict or serious rights abuses.

Goldcorp recognizes that Los Filos is operating in a “conflict-affected or high-risk” area.

“The violence carries both a terrible human cost to the communities, and a financial cost to Goldcorp as we are obliged to invest in additional security for our operations and personnel,” said Goldcorp’s Harvey. “It is essential to protect the jobs provided by legitimate investment so as to give community members economic opportunities other than crime.”

Goldcorp’s gold mining activities have been certified as conflict-free. Under the standard, companies operating in conflict zones must use their influence to avoid abuses by security forces and make them protect local populations.

“It is not enough for a company to simply say ‘there are risks but they are not our problem’,” said Michael Gibb, who leads advocacy group Global Witness’ conflict-minerals campaign.

He said the standard was positive globally but some miners in conflict-zones are not transparent about risks and corrective actions.

Last month, dozens of soldiers moved into Carrizalillo’s winding streets to restore order but they soon left, leaving villagers fearful and seeking help from the mine and authorities.

“We want them to provide more security. That’s what we’ve always wanted, we don’t want to live like this,” said Figueroa.

Another Canadian miner, Torex Gold Resources TXG.TO, operates in the same area of Guerrero but has taken a different approach.

In September, it agreed to pay for police check posts and patrols in villages near its projects after violence including the kidnapping, and later release, of 12 locals in February.

“The communities were vulnerable and in some ways the reason they have something to steal is because we’re there,” Torex CEO Fred Stanford told Reuters. “The activity we bring is disruptive to the fabric of their society and they’ve welcomed us in. We appreciate that and we can do our bit too to help them.”

Some Carrizalillo villagers say they want Goldcorp to fund police and military checkpoints and patrols along the short stretch of road between the heavily guarded mine and the unprotected village.

In letters seen by Reuters, villagers wrote to Goldcorp and authorities on repeated occasions asking for security, including just two days after the Guerreros Unidos occupation last year. Goldcorp says it is doing as much as it can.

“Goldcorp is very concerned with the level of violence in the communities surrounding the Filos mine. We continue to encourage the Mexican authorities to do their utmost to combat this violence,” Harvey said.