(REUTERS) -- Peru's government said on Tuesday the environmental impact plan for Newmont Mining's $4.8 billion Conga gold project was basically sound, seeking to reassure neighbors that the proposed mine would not pollute their water supplies.

The mine would be the biggest investment in the history of Peruvian mining and generate hundreds of millions of dollars in tax revenue. For weeks, the government has been trying to calm a dispute over the planned mine, which would replace a string of alpine lakes with reservoirs to provide farmers with water.

President Ollanta Humala has come out in favor of the project, saying the mine would generate thousands of jobs and accusing local political leaders of fomenting opposition for political gain.

Local officials and residents in the Andean region of Cajamarca plan to hold a one-day strike on Thursday against the Conga project, and Humala's team will lead two-rounds of negotiations with local leaders on Wednesday and Thursday to try to broker a truce.

The executive branch has looked at the issue ... and our view is that the plan doesn't have any major problems, Mines and Energy Minister Carlos Herrera told reporters.

The environmental issue, like any other, can always be improved, but we haven't found any negative surprsies.

Newmont says its environmental plan was exhaustively researched and rigorously adhered to high environmental standards.

The arguments by the communities are basically a result of mistrust. There is nobody who can tell me the data are wrong or say they have been miscalculated, Herrera said.

Humala's government has tried to defuse the dispute by offering local communities a social fund that would make sure they get better access to infrastructure and social services.

Herrera also said the government would offer guarantees that the mine would not hurt the environment.

Humala, a leftist former military officer who took office in July, campaigned on promsies to end hundreds of disputes over natural resources that threaten to hold up billions of dollars in private investment.