* Protests continue, water remains a big concern
* Newmont has slashed spending plans on project
* Auditors ask Newmont to build bigger reservoirs
By Terry Wade and Marco Aquino
LIMA, June 5 (Reuters) - Newmont Mining (NEM.N) will likely agree to improve the environmental plan for its stalled Conga mine in Peru and could resume construction on the $4.8 billion project anytime, Prime Minister Oscar Valdes said on Tuesday.
Valdes also said Newmont has all the necessary approvals to restart work on the most expensive mine ever attempted in Peru, though a new round of protests against the project could still thwart its construction.
"We are expecting a positive answer to be given in the coming days," Valdes told Peru's foreign press association. "Work can start at any moment."
To calm local community groups whose environmental protests halted work on the mine in November, President Ollanta Humala asked independent auditors to review the company's environment plan.
The auditors and the government then asked Newmont to build larger artificial reservoirs near the mine and try to save two of four alpine lakes it had planned to remove. The reservoirs would guarantee year-round water supplies to local towns that currently suffer from a lack of reliable water.
But protesters continue to say the mine will take scarce water sources from farmers. A fresh round of demonstrations has carried into this week.
Valdes has called those who are trying to blcok the mine's construction "extremists" and says the project will generate important tax revenues and jobs for the country.
Newmont, the world's No. 2 gold producer, did not respond immediately to requests for comment. The company said in late May it was cutting planned spending on Conga by two-thirds for the 2012-13 period because of delays. Chief Executive Officer Richard O'Brien said Newmont will spend $440 million on the Conga project over the next 18 months, down sharply from the $1.5 billion it previously budgeted.
(Reporting By Terry Wade and Marco Aquino; Editing by David Gregorio)
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