"The group consists of more than 50 Salafi jihadists," the source told AFP, adding that they were well armed and some were veteran Islamist militants who had come from northern Mali.
An AFP journalist nearby reported hearing an exchange of gunfire in the area, close to Tunisia's border with Algeria, which was surrounded by soldiers and patrolled by helicopters.
The group is commanded by an Algerian and two Tunisians originally from the regional capital, Kasserine, the security source said.
The gunmen laid homemade land mines in parts of the region which have already wounded around 10 soldiers and members of the national guard, some seriously, during the operation to flush them out.
The group originally consisted of 11 fighters for whom the Tunisian security forces have been searching since December, when they attacked the Bou Chebka border post and killed a member of the national guard.
"Yesterday we found grenades, military and homemade bombs, documents on how to make homemade bombs, coded documents, maps and mobile phones being used to make calls abroad," he added.
Unlike earlier in the week, today's operations were being carried out by the army, which has the only units capable of detecting land mines. The national guard, or auxiliary police, are playing a secondary role.
Bassem Haj Yahia, a guard who lost a leg after one of the bombs exploded, said the army was facing an organised and well-armed adversary.
The standoff in Mount Chaambi is the worst of its kind since clashes in 2007 between the army and Islamists in Soliman, near Tunis, under Zine El Abidine Ben Ali. A soldier, two policeman and 11 Islamists died.
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