SEOUL (AFP) - North and South Korea agreed on Friday to extend rare, high-level talks into a second day, following an initial round of discussions aimed at building on an August agreement to ease cross-border tensions.

The vice-minister level talks, held on the North Korean side of the border in the jointly-run Kaesong industrial zone, will resume Saturday morning, Seoul's Unification Ministry said.

"The two sides had a broad discussion of pending issues and exchanged views in a sincere manner," a ministry spokesman said.

The fact that both sides agreed to keep talking will be seen as a positive step for a process that was never likely to produce any substantial breakthrough.

Previous efforts to establish a regular dialogue have tended to falter after an initial meeting - reflecting decades of animosity and mistrust between two countries that have remained technically at war since the end of the 1950-53 Korean conflict.

The last such sit-down, with the mandate to discuss a range of inter-Korean issues, took place nearly two years ago.

Friday's talks were the fruit of an August accord that saw both sides step back from the brink of an armed conflict and commit to a process of de-escalation.

"Let's take a crucial first step to pave the way for reunification. I hope various pending issues will be solved one by one," South Korea's chief delegate Hwang Boo-Gi told his North Korean counterpart Jon Jong-Su as they shook hands in the morning.

The talks ran late into the night over three sessions interspersed with lengthy breaks to consult with their respective capitals.

Jon said the talks were an opportunity to overcome the decades of mutual suspicion and confrontation.

"Let's make efforts to break down the barrier, fill up the cracks and make a new and wide road together," he said.

The elephant in the room for any North-South dialogue is Pyongyang's nuclear weapons programme. But while Seoul was expected to raise the issue of denuclearisation, experts said the two sides were focused on more achievable targets.

"The North's denuclearisation needs to be seen as the ultimate goal of inter-Korea dialogue, not a pre-condition of it," said Kim Keun-Shik, a professor at the University of North Korean Studies in Seoul.

The talks came a day after North Korean leader Kim Jong-Un said the country had developed a hydrogen bomb - a claim treated with scepticism by US and South Korean intelligence officials.

There was no set agenda in Kaesong, but the two Koreas have clear, if not necessarily complementary priorities.

The cash-strapped North wants the South to resume lucrative tours to its scenic Mount Kumgang resort, which Seoul suspended in 2008 after a female tourist was shot dead by a North Korean guard.

Restarting the tours would be a useful propaganda victory for Kim Jong-Un, as well as providing a source of much-needed hard revenue.

South Korea, meanwhile, wants the North to agree to regular reunions for families separated by the Korean War.

Currently the reunions are being held less than once a year and with only a very limited number of participants - despite a huge waiting list of largely elderly South Koreans desperate to see their relatives in the North before they die.

For South Korean President Park Geun-Hye, who came to power with pledges of closer engagement with Pyongyang, a deal on the reunions would represent a welcome feather in her cap.

Park has repeatedly talked up the prospect of eventual Korean re-unification, but has offered little in policy terms to ease tensions with the perennially belligerent North.

With only two years left until the end of her term, Cheong said Park was "running out of time" to try to build a legacy when it comes to inter-Korean relations.