The fighting took place in the coastal town of Cateel in Davao Oriental province, about 950 kilometres southeast of Manila.

'We are still not sure if it was an ambush or encounter,' said Col Benito de Leon, spokesman for the 10th Infantry Division in the area.

President Gloria Macapagal Arroyo ordered the military last year to crush the 40-year-old Maoist insurgency by 2010, and earlier this week extended the term of the chief of staff for another three months because of ongoing operations against the rebel New People's Army.

Army officials said earlier that the guerrillas lost about 1,400 fighters in battles and surrenders last year, bringing them to about 5,700 - their weakest level in 20 years. -- AP