The US suspects the North Koreans may be reviving their nuclear weapons programme at the site.

The two sides made little progress in a first day of talks.

The North Korean deputy foreign minister Kim Kye-Gwan, said big differences remained.

"Yesterday the US and North Korean sides stuck to their original positions," he said.

The US has rejected North Korean demands for $300m as an entry fee to the Kumchangni underground facility which Washington presumes to be nuclear related and which was uncovered last summer by satellite spy photos.

North Korea wants the payment in compensation as it says it will no longer be able to use the underground site once it has been seen by outsiders. But it denies it is being used for atomic weapons.

After Saturday's meeting, US ambassador Charles Kartman brushed aside journalists' questions.

"It was just another day of talking about the underground problems," he said.

Shaky agreement

Earlier, US officials said failure to permit inspections would jeopardise a 1994 agreement under which North Korea agreed to give up its nuclear programme in return for fuel-oil and power stations.

Although the Clinton administration has ruled out handing over any cash to North Korea, it has hinted that it might increase its contribution to a UN appeal for aid to the famine-stricken country.

The talks will be followed by broader discussions involving China and South Korea on establishing a formal peace mechanism on the Korean peninsula.

Painfully slow negotiations

The BBC's State Department Correspondent, Richard Lister, said progress on formally ending the state of war between North and South Korea has been painfully slow.

American officials say unless North Korea is willing to provide concrete assurances that it is not secretly reviving its nuclear programme, it will be difficult to discuss other confidence-building measures for the peninsula.