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Peru’s new prime minister denied on Sunday that the government was in crisis after the sudden resignation of his predecessor and the suspension of a $4.8bn gold mining project.

Oscar Valdés, a former military officer, pledged a continuation of “moderate” policies amid fears of a “militarisation” of the administration of Ollanta Humala, the president and himself a former army officer and leader of a failed coup in 2000.

A cabinet reshuffle was expected to unseat several ministers but Mr Valdés pledged that Luis Miguel Castilla, a well-respected centrist, would remain as finance minister.

Departing prime minister Salomón Lerner was Mr Humala’s election campaign manager and a leading force behind the president’s ideological shift from radical leftist to moderate.

Mr Lerner had also taken the lead in talks with protestors opposed Newmont’s Conga mine, the biggest single investment in Peruvian history.

His resignation letter suggested a rupture with the president over how to proceed with the Conga dispute, which paralysed the region of Cajamarca for almost a fortnight before Mr Humala called in troops and declared a state of emergency.

Locals say Conga would turn four highland lakes they rely on for drinking water and irrigation into waste disposal ponds and have mounted increasingly violent protests.

“Our way has been dialogue and consensus-building among Peruvians to avoid confrontation and reaffirm our democratic life and vocation,” Mr Lerner said in the letter, a copy of which was published by La Republica, a Lima daily paper.

“The beginning of a new era of government requires . . . strategy of government action . . . I resign with the sole purpose that you have complete freedom to make such adjustments.”

Jo-Marie Burt – a senior fellow at the Washington Office on Latin America, a human rights group – said the Conga dispute had become “a battle for the heart and soul of the Humala administration.

“Mr Lerner seems to have really been the force for promoting the dialogue in Cajamarca”, she said and the naming of a former military officer to replace him was “very concerning”.

Mr Humala has called the Conga protesters “intransigent” and promised an “iron fist” for those who compromise the rights of the public.

Defusing social conflicts is a challenge for Mr Humala and his ideologically divided cabinet, given their promises to provide impoverished Peruvians with a stake in the country’s stellar economic growth.

The president has repeatedly said he sees the $50bn in projected mining and oil investment over the next decade as a driver of his “social inclusion” policies. He has increased mining royalties since taking office on July 28 and ushered in a law to give communities the right to be consulted about mining or extractive industry investments.

However, the list of big ticket projects that have ground to a halt in the past year over environmental or community concerns – many before Mr Humala came to power – is growing, including Southern Copper’s $1bn Tia Maria copper project; Bear Creek of Canada’s Santa Ana silver project; Egasur of Brazil’s Inambari hydroelectric dam; and Odebrecht of Brazil’s Tambo 40 hydroelectric scheme.

Following protocol, Mr Humala’s entire cabinet tendered their resignations upon Mr Lerner’s resignation, giving the president the opportunity to reshuffle his team.

While Mr Lerner’s resignation came as a surprise, Lima has been buzzing with rumours of a reshuffle for weeks, with Carlos Herrera Descalzi, the mining minister; Susana Baca, culture minister; Miguel Caillaux, agriculture minister; Ricardo Giesecke, environment minister and Aíd García Naranjo, women and social development minister, among those thought to be in danger of losing their posts.

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