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 Mexicos southern gold belt, leading to a wave of murders.

As a signatory to a Conflict-Free Gold Standard drawn up by the World Gold Council industry group, Goldcorp 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 $3m (£2m) 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.

Juan Jesus Canaan, an activist who explores clandestine graves in search of missing people, said the presence of Los Filos mine and the wealth generated by it brings crime and drug addiction. Gold brings bonanza but it also brings other things with it. It brings crime, drug addiction, a lot of things. The villages economy, from this place and others, revolves around the mine, Canaan said.

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. 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. The Guerreros Unidos gang is the primary suspect in the disappearance and apparent murder of 43 students last year, a case which has drawn international attention and fierce criticism of President Enrique Pena Nietos government.

Carrizalillo villagers describe systematic extortion by both cartels. 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. Still, 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 the May 2014 deal, Goldcorp pays the equivalent of 4oz of gold per hectare in rent to 175 landholders and a communal land fund – an estimated $3m a year at todays prices, which is a small fortune for a village of around 1,000. Goldcorp recognises that its Los Filos is operating in a conflict-affected or high-risk area, but federal police commissioner Enrique Galindo said that Goldcorp has not raised any alarms with police over potential risk at the mine.

This mine in particular, I have spoken to the director and the chief of security of the mine. They did not report any risk situations. Those who present them is the community, due to the things we have explained.

But the business, the mine, as an income generating area, has not presented, at least not to us as we have not been required, as being in a situation of risk, Galindo said.

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, but Goldcorp says it is doing as much as it can.

Goldcorps 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.