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Fighting erupted between the Movement for Oneness and Jihad in West Africa (MUJAO) and Tuareg National Movement for the Liberation of Azawad (MNLA) as tensions soared between the rebels who seized the town in March.
MUJAO spokesman Adnan Abou Walid Sahraoui said it had "seized the governor’s palace and the residence of MNLA secretary general Bilal Ag Cherif who fled with his soldiers."
He said some 40 members of the MNLA had been taken prisoner.
Witnesses earlier reported that Tuareg rebels had fled their headquarters in the town governorate, with many left dead, injured or taken captive.
"The (Tuareg) fighters from the National Movement for the Liberation of Azawad have fled, others were killed, others arrested," said the owner of a petrol station next to the governorate.
While no official death toll was available, a tally from residents showed at least 21 people had been killed in the fighting.
A local journalist reported seeing 11 Tuareg fighters lying dead in the suburb of Djoulabougou, while other witnesses counted at least 10 bodies on the road leading to the airport.
A hospital source said they had received three dead bodies of MUJAO members and were tending to 14 injured.
The streets were deserted after a morning of heavy weapons fire between the two groups.
"Everyone is at home, very few people are outside," a resident said on condition of anonymity.
The two rebel groups have held the town together in an often unclear and uneasy relationship since it was seized along with the rest of northern Mali in the wake of a March 22 coup in Bamako.
The clashes followed a protest on Tuesday by residents angry over the death of municipal councillor Idrissa Oumarou from the party of Mali’s transitional president Dioncounda Traore, who in April took over from the junta that staged the coup.
Oumarou was shot dead on Monday and the protesters blamed the rebel groups for his murder.
Armed men on Tuesday fired on the group of demonstrators, leaving at least one dead and a dozen injured.
Witnesses accused the MNLA of the shooting, which the Tuareg movement denied, saying it was "manipulation" on the part of MUJAO.
"The MNLA firmly condemns those who shot at the crowd protesting its discontent in Gao," said Ibrahim Ag Mohamed Assaleh, a leader of the movement.
MUJAO said it had arrested two people for Oumarou’s murder but did not identify them.
The jihadist group is an offshoot of Al-Qaeda in the Islamic Maghreb (AQIM), both of which are backing the main Islamist rebel group Ansar Dine (Defenders of Faith).
The MNLA spearheaded the takeover of the north when the March 22 coup in Bamako left the country in chaos, and were soon joined by the previously unknown Ansar Dine, which has since taken the upper hand.
Tensions have been high between the two rebel groups, as they both pursue different objectives and ideologies.
While the secular Tuareg want independence for their northern homeland, which they call Azawad. Ansar Dine’s main demand is a state where Islamic law is strictly implemented.
Last week a young couple was publicly lashed for having a child out of wedlock, while smokers have also been whipped and women forced to wear veils in the towns of Timbuktu, Gao and Kidal.
Ansar Dine and Tuareg leaders have been holding talks in the Burkina Faso capital with mediator President Blaise Compaore on a way forward for the troubled north.
Compaore’s foreign minister, Djibrill Bassole, held talks Wednesday in neighbouring Algeria, the region’s top military power.
"Algeria’s role in solving the cris in Mali is extremely important," Bassole told the official APS news agency.
Most of AQIM’s top leaders are from Algeria.
Both Traore’s transitional administration and Burkina Faso have said they favoured a negotiated solution but Bassole told APS in Algiers that "the military option is not being ruled out to put an end to the Malian crisis."
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