Increased activity has been spotted near the site of North Korea's 2006 nuclear test but it is unclear whether the hardline communist country is preparing for a second test, a report said Wednesday.

Smoke was spotted recently at various places around the site in the country's northeast, a South Korean government source was quoted by Yonhap news agency as saying.

"We are closely watching to determine whether North Korea is working to repair the nuclear site," the source said, adding the smoke is believed to have come from the burning of clothes and equipment used during the repair work.

Other sources quoted by Yonhap said the North may be simulating activity to pressure the United States amid a deadlocked nuclear disarmament deal. They said the North is believed to have finished repairing the site after its first test on October 9, 2006.

South Korea's intelligence agency said it could not confirm the activity at the site at Punggye-ri in Gilju country of North Hamkyong province.

The report came as US nuclear envoy Christopher Hill arrived in the North to try to salvage the crumbling disarmament deal.

North Korea's first underground nuclear test sparked international alarm and United Nations sanctions. But weeks later the North rejoined disarmament talks.

Those negotiations are now falling apart because the North refuses to accept US-led demands for thorough inspections of its nuclear facilities.

The North last week announced it would begin restarting its plutonium reprocessing plant at Yongbyon, located 100 kilometres (60 miles) north of Pyongyang.

It shut down Yongbyon in July 2007 and began disabling it in November. In return, Pyongyang was to receive one million tons of fuel oil or equivalent energy aid and Washington was to remove it from the terror blacklist.

However, Washington refuses to act on the delisting until the North accepts the procedures for outside verification of a nuclear declaration which it submitted in June.

related report
Two Koreas to hold military talks Thursday: officials
North and South Korea have agreed to hold their first military talks for eight months on Thursday, the defence ministry said in Seoul, amid deadlock in a six-nation nuclear disarmament deal.

The meeting will be at the truce village of Panmunjom, inside the heavily fortified Demilitarised Zone dividing the peninsula, the ministry said.

The North last week proposed resuming the working-level military talks in a rare overture to the South.

"The North has accepted our counter-proposal to hold talks on Thursday," a ministry spokesman told AFP.

"The agenda was not fixed but we believe tomorrow's meeting will focus on the implementation of agreements reached at earlier talks."

Pyongyang suspended all government-to-government contacts with Seoul after conservative President Lee took office in February with promises of a tougher North Korea policy.

Ties soured further after North Korean soldiers in July shot dead a Seoul tourist who strayed into a restricted zone at a North Korean resort.

The North has blamed the South for the incident and refused to let it send an investigation team. Seoul cancelled tours to the resort and withdrew staff.

South Korean Prime Minister Han Seung-Soo has said he hoped the military meeting would help thaw relations.

The proposal for new talks came despite a deadlock in an international nuclear disarmament deal. The North has announced it will start work as early as this week to reactivate its plutonium reprocessing plant.

US negotiator Christopher Hill arrived in the North on Wednesday to try to persuade it to change course.

At a rare summit in October 2007 involving Seoul's then-liberal president, the two sides agreed in principle on sweeping joint economic projects. The new South Korean government says it will reassess the projects.

The last working-level military talks in January were supposed to discuss ways to ease travel, customs clearance and communications at the Seoul-funded Kaesong industrial estate just north of the closely guarded border.

But they ended without agreement.

High-level military talks held in December 2007, to discuss a proposed joint fishing area to avert clashes in the Yellow Sea, also ended with no agreement.

The two nations have remained technically at war since their 1950-1953 war ended with an armistice and not a peace pact.