Drawing thousands of dreamers and desperadoes into its honeycomb of tunnels for a generation, the logged-out mountain 120 kilometres (75 miles) north of Davao City has yielded some 2.7 million ounces of the precious metal, according to official estimates.

Franco Tito, a former hired gun who is the senior elected official in this village named after a woodland fairy, awards honour students with gold medals and packs a .45-calibre gun, a stark reminder of the region's violent past.

He worries about the stream that bisects the community of some 40,000 people -- it is choked with plastic, garbage and the milky-coloured detritus of the area's preferred antiquated mining process.

The tailings -- residue from the process of separating the gold from the ore -- run into the Naboc stream and eventually poison the Agusan, one of the country's largest river basins.

"There were four major problems when I arrived here -- law and order, legality, taxation and siltation. I have solved the first three, and now I want to solve the fourth," he told AFP.

Liquid mercury, a highly regulated substance, is openly sold here for 1,200 pesos (29.50 dollars) a kilogram in stores that also stock food.

Shabby huts made of plywood and sheets of corrugated tin cling precariously to cliffsides. Dirt bikes ply the muddy roads. The main causes of death are landslides and tunnel cave-ins.

The miners are still paid in ore, not cash. After school, children pound the ore into dust.

Many residents suffer the effects of mercury poisoning, as the heavy metal is used to separate the gold from the ore and contaminates food and water.

"You need a kilo (2.2 pounds) of mercury to process 270 kilos of ore," said Guillermo Carmona, who was kicked out of the Philippine Army after he was found to be moonlighting here.

He sports a tattoo of his old infantry unit along with a thick gold chain and pendant, visible reward from his backyard mill, a series of huge metal centrifugal drums that are spun by motor to separate the gold from the crushed rock.

"We have a siltation problems at the Naboc river," said Arturo Uy, governor of Compostela Valley province. "A few years ago there was a plan to put up a tailings dam, but I do not know what happened to the funding."

A UN-funded study in 1999 found methyl mercury contamination of nearly three times over the safe ceiling for rice, mussels and fish harvested from the Naboc or farms irrigated by its water.

The Institute for Forensic Medicine at Germany's Ludwig-Maximilians University also found high levels of mercury contamination in the area.

Fortune hunters flooded in after September 1983, when a Mandaya tribal elder first panned the yellow metal on the Naboc river. They promptly bastardised the hamlet's name to "diwalwal," slang that refers to exhaustion after hard work boring holes through rock on the mountainside.

Tito, who still moves around with armed bodyguards, does not dispute rumours that he has killed at least 40 men, saying: "We were all illegals, so none of the killings were reported to the authorities."

There were few winners in the land grab that followed the discovery of gold here, and most of them are now firmly entrenched in local politics.

"In the old days this was the wild wild west," Tito said, recounting his transformation from army misfit, neighbourhood tough, bodyguard and mineshaft guard, to a key stakeholder, thwarting three assassination attempts along the way.

"All sorts of undesirables were drawn here -- discharged soldiers and police, hoods, holdup men, kidnappers, rapists, ex-convicts, fugitives, people who welshed on their debts," he said.

The national government was largely absent in the early days, and it was cut out of the spoils since by law small-scale miners need only pay income tax.

Instead miners forked out a "revolutionary tax," essentially extortion money extracted by the self-styled New People's Army to fund its deadly decades-old Maoist insurgency.

Last month, the guerrillas attacked a mill near here, killing two bodyguards of the Monkayo town mayor, Manuel Brillantes.

In 2002 President Gloria Arroyo declared Mount Diwata and surrounding areas a mineral reservation, laying out plans to bid out the property to mining companies which would employ modern methods and safeguard the environment.

But after paying for their right to be here with blood, the locals are indignant.

"We don't want Diwalwal to remain like this," Governor Uy said. "But we will oppose its turnover to a foreign-owned company."

Tito said: "Convert this into a highly mechanised, large-scale operation and that would be throwing thousands of people out of work."

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