Austria said on Sunday it had won more time to try to secure the release of two Austrian tourists being held hostage by Al Qaeda in Mali's remote northeast Kidal region.

The captives, Andrea Kloiber, 43, and Wolfgang Ebner, 51, went missing while on holiday in Tunisia last month and the Algerian-based Al Qaeda in the Islamic Maghreb said it seized them on Feb. 22.

Al Qaeda had set a deadline of midnight on Sunday for its demands to be met, but Austria said this had been extended for an unspecified amount of time.

"Beyond the existing deadline which was to expire today, Sunday, at 2400, more time for the efforts to free Andrea Kloiber and Wolfgang Ebner has been made available," Austrian foreign ministry spokesman Peter Launsky-Tieffenthal told reporters in Vienna.

An Austrian diplomatic envoy has been working to try to obtain the release of the tourists.

"Efforts continue at all levels to achieve the speediest possible release of the two Austrians," Launsky-Tieffenthal added. He said relatives of the couple had been told of the development.

In neighbouring Algeria, security sources said Austria had accepted the principle of paying a ransom and discussions were focused around the sum of $6.7 million.

Libya had agreed to act as an intermediary to help finalise the deal, using its influence with a local Tuareg tribe known as El Barabich, the security sources said.

There was no immediate comment from Austrian or Libyan officials on the reports.

Al Qaeda demanded a ransom and the liberation of 10 militants held in Algeria and Tunisia within three days from midnight on Thursday, a deadline expiring at midnight on Sunday.

But the security sources in Algeria said Al Qaeda had stopped demanding the release of the prisoners and was now only interested in money.

Austrian Foreign Minister Ursula Plassnik said earlier that the envoy had met the president of Mali, Amadou Toumani Toure, to discuss the case.

VAST TERRITORY

A senior Malian military officer confirmed information reported by an Algerian Web site, Ennahar, which said that the two hostages were being held captive in northern Mali.

"Intelligence shows their presence in Malian territory, in the Kidal region, more precisely in the Tegargar sector," the officer, who asked not to be named, told Reuters.

The Algerian Ennahar Web site, which specialises in security matters, said on Saturday the senior Austrian envoy had started negotiations by telephone with the kidnappers.

Plassnik did not confirm this.

Mali straddles the Sahara and the arid Sahel belt to the south, a region roamed by smugglers, rebel groups and nomads.

Al Qaeda's north Africa wing, which changed its name last year from the Salafist Group for Preaching and Combat (GSPC), has long been involved in smuggling, money laundering and protection rackets in the region.

The Malian officer said the zone where the two captives were being held was a well-known Islamist hideout.

"The area from Tessalit to Kidal has become a fiefdom of the Islamists. They know the geography, which is vast and difficult to control. You can find bearded Salafist Islamists of all kinds there, from Pakistan, Afghanistan and the Maghreb," he said.

The Web site of Ennahar said the captives were being held by a group led by Algerian militant Abdelhamid abu Zeid at an Al Qaeda base about 100 miles from Kidal town in Mali.