Brazilian authorities are investigating reports of a massacre of up to 10 people from an isolated tribe in the Amazon by illegal gold miners.

The killings, alleged to have taken place in Javari Valley, are claimed to have been carried out by men working for gold prospectors who dredge illegally in the region’s rivers.

If proven, the murders would confirm that severe budget cuts to Brazil’s indigenous agency are having deadly effects. The agency was forced to close two bases in the same region earlier this year. Investigators face a 12-day boat trip just to reach the area.

Pablo Beltrand, the prosecutor from the remote Amazon town of Tabatinga – near the Peruvian border and 700 miles from the Amazonas state capital, Manaus – said his team was first informed about the possible murders in the Javari Valley at the beginning of August. A fifth of Brazil’s uncontacted tribes live in this wild region.

“We received a communication from federal government,” he said. “The ongoing investigation is about the possible death of indigenous people.”

Beltrand said he could not give more information about the inquiry but said that two men arrested recently in a police and army operation into illegal gold prospecting in the area were not connected to the case.

Brazil’s National Indian Foundation, known as Funai, first sent a team of three to the small town of São Paulo de Olivença after receiving reports that men working for gold prospectors had boasted in a bar of killing a group of eight to 10 indigenous people.

Leila Sotto-Maior, coordinator for isolated and recently contacted Indians at Funai, said the men had brandished a paddle and a small bag used for carrying food that they claimed they had taken from their victims.

“They were saying they killed indigenous people and threw them in the river,” Sotto-Maior said. She emphasised that the massacre has yet to be confirmed.

“It is very difficult to investigate something like this after time [has passed]. We don’t have the bases,” she said.

Funai has had its budget almost halved this year by the business-friendly government of President Michel Temer. His government recently proposed to reduce the protected area of Amazon forest and has announced plans to allow mining and development in other protected areas.

Burnt communal houses of uncontacted Indians, pictured in December 2016, could be signs of another attack in the region. Photograph: Courtesy of Funai

Sotto-Maior’s department at Funai has less than £600,000 to spend this year protecting 103 tribes of non-contacted indigenous people across this vast country, as well as recently contacted groups. Around 20 isolated groups are believed to live in the Javari Valley, where around 80 recently contacted indigenous people also live.

“To know we do not have the capacity to stop something like this … it’s very difficult,” Sotto-Maior said.

Cleber Buzatto, executive secretary of the non-profit Indigenous Missionary Council, said cuts to Funai budgets and the closing of bases in areas with isolated tribes increased the risk of attack.

“This is a mechanism of encouragement of invasion of territories and makes attacks against isolated Indians more probable,” he said. In June, UN rights experts denounced a surge of killings related to rural land disputes in Brazil this year.

A spokeswoman for Brazil’s federal police said: “The investigation is still ongoing to ascertain the provenance of the information.”

A spokesman for the Brazilian army said an operation carried out in the same area between 28 August and 3 September had destroyed four illegal gold dredgers. The documents of two others were being analysed.