Iran said Monday it has started mining uranium for the first time and will soon open a facility to process the ore into fuel, vowing to move ahead with a nuclear program it says is solely for electrical production.

The project would give Iran, which Washington accuses of seeking to develop nuclear weapons, independent access to fissile material. In building its first power plant, to be completed later this year, Iran is relying on Russia for its nuclear fuel.

Mines near Ardakan, in central Iran, have begun extracting uranium from underground reserves, said Gholamreza Aghazadeh, the head of Iran's Atomic Energy Organization, according to the official Islamic Republic News Agency.

The United States has "grave concerns that Iran is using its supposedly peaceful nuclear program ... as a pretext for advancing a nuclear weapons program," State Department spokesman Richard Boucher said in Washington.

President Mohammad Khatami on Sunday announced the discovery of the reserves, near the central city of Yazd, and said Iran was setting up production facilities "to make use of advanced nuclear technology for peaceful purposes."

Iran insists it is following international regulations and that all its facilities are open to inspectors from the U.N. nuclear watchdog agency. The International Atomic Energy Agency said Monday it has been aware for several years of Iran's plans to mine and process uranium.

"This comes as no surprise to us, as we have been aware of this uranium exploration project for several years now," Melissa Fleming, spokeswoman for the Vienna-based IAEA said. She added that an IAEA team visited the mine in question in 1992.

IAEA head Mohammed ElBaradei is to lead a team to Iran on Feb. 22-23 to conduct inspections at two nuclear facilities at Natanz and Arak, in central Iran, IAEA spokesman Mark Gwozdecky said Monday.

Washington says those two facilities are part of a secret Iranian nuclear weapons program. President Bush has grouped Iran along with Iraq and North Korea as part of an "axis of evil" seeking to develop weapons of mass destruction.

Iran is building its first nuclear power plant at the southern port of Bushehr with Russian help. The United States has tried to dissuade Russia from assisting the project for a 1,000-megawatt reactor.

To allay U.S. fears that the fuel it is providing the Bushehr plant could be used for a weapons program, Russia agreed with Iran last year to take back the spent fuel rods from the plant.

Aghazadeh said that deal still held for Bushehr. But he said Iran hoped "in the not so distant future" to "complete the fuel cycle," meaning to have full facilities to produce and process fuel.

However, Boucher told reporters that "Iran's admission that it's been mining uranium when Russia has agreed to provide all the uranium fuel for the lifetime of the Bushehr reactor raises serious questions about Iran's supposedly peaceful nuclear program."

An Iranian opposition group has raised alarm about the two sites.

"Exploiting the current crisis in the region, the mullahs' regime has stepped up its efforts to acquire nuclear weapons," Alireza Jafarzadeh said, a spokesman for The National Council of Resistance of Iran.

A plant for processing the mined uranium ore into fuel will be completed "in the near future" in Isfahan, in central Iran, Aghazadeh said. The next stage would be to complete a facility for encasing the material into fuel pellets used in a reactor, he said.

Aghazadeh said the Isfahan factory would meet the fuel needs required for a previously unannounced facility in nearby Kashan. No further details were available on the Kashan plant, including what its purpose would be, and Iranian officials have not previously commented on it.

U.S. officials have said that Iran's lack of fissile material -- either enriched uranium or plutonium -- was a key stumbling block for its goals of either producing or acquiring nuclear weapons.