North Korea has started digging tunnels at its nuclear test site in apparent preparation for a third atomic detonation, a report said Sunday.

The North started building at least two new tunnels at its Punggye-ri facility in northeastern North Hamgyong province for a possible underground atomic test, Yonhap news agency said, citing a senior Seoul official.

The report comes after Pyongyang racked up tensions at the end of last year by launching an artillery barrage against a South Korean island and disclosing a new nuclear programme, before going on a charm offensive last month.

South Korean President Lee Myung-Bak Sunday reiterated his calls for the North to adopt a new approach "if it can change... so that North Koreans can also have a chance to breathe".

The communist nation conducted its first two nuclear tests, in October 2006 and May 2009, at the Punggye-ri facility, the second coming the month after it walked out of six-party regional nuclear disarmament talks.

The unnamed official quoted by Yonhap said: "It is obvious evidence that it (the North) is preparing a third nuclear test."

Pyongyang is building more than one tunnel to choose the best one for a possible test, as tunnels cannot be reused after a nuclear test blast, the official was quoted as saying.

The official added the possible test would probably be carried out using material from the North's plutonium stockpile, which Seoul and Washington estimate to be enough for six to eight bombs.

Cross-border ties have been icy since Seoul last May accused Pyongyang of sinking a South Korean warship and killing 46 sailors -- a charge the North angrily denied.

The tension soared further when Pyongyang's shelling of a frontier island of Yeonpyeong left four South Koreans, including two civilians, dead in November.

The same month the nuclear-armed North disclosed an apparently operational uranium enrichment plant to visiting US experts.

Pyongyang claims the programme is for peaceful energy development, but outside experts have said it could easily be converted to produce weapons-grade uranium, giving the North a potential second way of making atomic bombs.

Security concerns heightened further after recent satellite images showed Pyongyang was taking steps to test a missile that could eventually reach the US.

An image posted on the website of US defence information group GlobalSecurity.org showed a completed missile launch tower at the North's Tongchang-ri base on the west coast.

US Defence Secretary Robert Gates warned last month that North Korea could have missiles within five years that would directly threaten the United States.

Lee told reporters that 2011 would be a good time for the international community to press the hardline communist country to change its course, stressing Seoul was ready for genuine dialogue to make that happen.

"I'd like to convey the message that this year is a good chance... I think the North is also thinking hard on the issue," he said.

Earlier this month Lee raised the possibility of a summit with the North's leader Kim Jong-Il.

But the first cross-border meeting since the shelling, held on February 9, broke down as Pyongyang officials stormed out after Seoul demanded an apology for the Yeonpyeong bombardment and the sinking of the warship.

The North said there was no need for further cross-border dialogue following the collapse of the talks, which it blamed on "traitors" in the South.