The Islamist guerrillas stormed and captured remote Musa Qala -- which British forces pulled out of last year in a controversial deal -- after disarming the weak police force last week.

One of their commanders was killed in a Nato-led International Security Assistance Force (Isaf) air strike days later but villagers told AFP by phone there were still a few hundred militants in town.

A tribal elder involved in talks to persuade the insurgents to leave, after warnings they could face more ISAF action, said they had "suddenly" refused further negotiations.

They had said that "our leaders have told us to resist," said the elder who spoke to AFP by phone from Musa Qala. He spoke on condition of anonymity, fearing his own safety.

"At the beginning the Taliban had accepted to talk to authorities through tribal elders," the chief said. "But suddenly they said they don't want to talk any more."

The elderly man said there were around 300 Taliban fighters in the town and they had started digging trenches and laying mines to respond to any potential military action by Isaf and Afghan security forces.

Authorities would not confirm the elder's information.

"At this point, things are the same as they were," said Nabi Jan Mullahkhail, police chief for Helmand province in which Musa Qala sits.

"The government has got its own programmes and we're working on it." He would not give details.

Isaf, which has most of a deployment of more than 5,000 British troops in Helmand, would not comment.