After seizing the strategic northern Mali towns of Kidal and Gao, Tuareg rebels today began besieging the ancient city of Timbuktu, taking their fight for a homeland for the nomadic people to the last major government holdout in the north.

Residents contacted by telephone said they were cowering inside their homes as blasts from heavy arms and automatic gunfire crackled around the renowned Islamic intellectual centre where demoralised soldiers are fleeing.

The Tuareg rebels are taking advantage of the chaos surrounding last week's coup in the faraway capital Bamako to take the town of Kidal, located 800 miles from Bamako, on Friday. They seized the biggest northern city of Gao, located around 745 miles away, yesterday - cities that never fell in previous rebellions.

If Timbuktu were to fall, which is the closest of the three located around 620 miles from the capital, it would be the biggest prize yet for the nearly three-month insurgency.

Timbuktu resident Mohamed Lamine said the shooting began at dawn today.

"We are hearing heavy weapons going off, coming from the south and east of the city. A part of the army abandoned the city last night," he said.

In Gao, which the rebels seized overnight, the insurgents were going from bank to bank trying to force their way into the safes, said resident Hama Dada Toure. And in Kidal, which is now starting its second day under rebel control, residents said an Islamic faction within the larger rebellion was going from shop to shop demanding that businessowners take down pictures of unveiled women.

A hairdresser who fled the city said that he was told to take down the posters in his beauty shop showing different types of hairstyles, because the women were not covered.

In Bamako, the city was on tenterhooks today waiting for a 72-hour deadline to expire tomorrow. The deadline was issued by Mali's neighbours who are threatening crippling sanctions if the junior officers that seized control in a coup earlier this month do not hand power back to civilians.

Coup leader Capt Amadou Haya Sanogo emerged from his barracks late yesterday to tell reporters that he was confident his junta would reach an agreement with the regional body representing states in West Africa.

"The conclusions are very good," he told reporters, after a closed-door meeting with the foreign affairs minister of neighbouring Burkina Faso.