By Tiemoko Diallo

BAMAKO, June 6 (Reuters) - Mali has replaced most of its military and security chiefs to improve leadership of its armed forces as they struggle to quell an escalating year-old Tuareg insurgency in the remote Saharan north.

President Amadou Toumani Toure's government decided to replace a handful of the country's top officers at an extraordinary cabinet meeting late on Thursday after two days of fierce fighting in the region near the border with Algeria.

The overall armed forces chief, the head of the air force and the national directors of both the police and the paramilitary gendarmerie were replaced, according to a government communique cited by state media on Friday.

Colonel Gabriel Podiougou, head of the land army, was promoted to overall armed forces chief.

"Since the start of the conflict he has not spent more than a week in Bamako. He's always with his men in the field -- in a region he knows well after serving more than seven years in northern Mali," a military official, who declined to be named, said of Podiougou.

The sackings seemed to be a response to an escalation in the fighting in the past month from a government that has engaged in several fruitless rounds of peace talks with nomadic Tuareg rebels since an intermittent rebellion resurfaced last year.

"When you make such changes as restructuring the security forces ... it shows the government is limited in its choices," said Rolake Akinola, an analyst with Control Risks in London.

The latest fighting occurred on Wednesday and Thursday after army units attacked rebel positions around Insalat, a stronghold of Tuareg insurgent leader Ibrahima Bahanga in the northeastern Kidal region. Military sources said heavy weaponry was used.

"There is still no death toll, but we can already tell you there was serious damage -- several four-by-fours and rebel fuel stocks were destroyed," a defence ministry source told Reuters.

"The army also intercepted a convoy bringing ammunition from Algeria. There are casualties on both sides, but we don't yet have a precise toll," he said.

REGIONAL CONFLICT

Fleeing the upsurge in fighting in recent weeks, more than 1,000 Tuareg civilians have arrived in Mali's southern neighbour Burkina Faso, including more than 300 now sheltering in the national stadium in the capital Ouagadougou.

Landlocked Mali, Africa's third biggest gold producer after South Africa and nearby Ghana, stretches deep into the Sahara.

Its borders with Mauritania to the west, Algeria to the north and Niger to the east stretch for more than 2,000 miles (3,400 km) and are virtually impossible to police, giving free rein to armed groups and traffickers of guns, drugs and humans.

Algeria mediated in talks between government and rebels last year, early in the latest phase of a rumbling conflict that peaked during Tuareg revolts in Mali in the 1960s and 1990s.

Fierce fighting last month, which Mali's defence ministry said killed 17 rebels and 15 army soldiers, blew apart the latest peace accord, mediated by regional power broker Libya.

"The stakes are rising. We've got companies, beyond gold exploration, wanting to explore for oil in northern Mali," said Control Risks' Akinola.

"There has been significant interest by investors wanting to explore for oil in Timbuktu (and other northern towns) ... If oil is eventually discovered, that could of course play a role."

Tuareg tribesmen in neighbouring Niger also launched a fresh rebellion early last year, demanding greater autonomy and a bigger slice of revenues from French-operated uranium mines in their traditional fiefdom around the northern town of Agadez. (For full Reuters Africa coverage and to have your say on the top issues, visit: http://africa.reuters.com) (Writing by Alistair Thomson; Editing by Pascal Fletcher)

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