A report on state television said researchers from Iran's Atomic Energy Organisation, after six years of research, had mastered the technique of employing microbes to purify uranium ore in mines prior to mining.

It said "using biotechnology substantially decreases the cost, increases optimisation and prevents environmental contamination" in the process that leads to the production of yellowcake, or concentrated uranium oxide.

The report, quoting a senior researcher, said the microbes were "successfully used in experimental stages" in central Iran's uranium mines.

"This bacteria is very valuable" and makes the production of yellowcake "100 to 200 times cheaper", he said.

Yellowcake is a part of the early stages of the nuclear fuel cycle -- a process that Iran insists it only wants to master so it can generate electricity.

The United States in particular accuses Iran of using atomic energy as a cover for nuclear weapons development.

The latest development, touted by state television as a "breakthrough", is likely to reinforce the impression among Iran's critics that even though Tehran has been forced to suspend certain fuel cycle activities it has continued to make great strides on others.

To make yellowcake, first uranium ore must be mined, then milled and processed in acid. But often mined ore is of a very low concentration and extraction involves expensive and hazardous processes such as roasting and smelting.

Using biotechnology -- or a technique known as "bioleaching" -- a bacteria introduced to the ore, eats on iron sulphur and produces sulphuric acid which in turn dissolves the ore and separates the uranium.

This then makes yellowcake production easier.

On August 8 Iran chose to end its freeze on the conversion of yellowcake to uranium hexafluoride gas (UF6) at a facility near the central city of Isfahan.

The Islamic republic had agreed to suspend fuel cycle work, but partially broke the freeze in retaliation to demands from Britain, France and Germany that it scrap its fuel cycle programme in exchange for a package of incentives.

Iran insists it has the "right" to a peaceful nuclear programme as a signatory of the nuclear Non-Proliferation Treaty (NPT).

Yellowcake production and conversion is a precursor to the ultra-sensitive process of enrichment, which involves UF6 being spun through cascades of centrifuges to produce enriched uranium.

When enriched to low levels, reactor fuel is produced.

But high levels of enrichment can produce the core of a nuclear weapon -- hence the demands of the EU-3 and the United States for Iran to abandon the fuel cycle altogether as the best "objective guarantee" it will not acquire the bomb.

So far Iran has agreed to maintain a freeze of enrichment at a plant in Natanz, although the board of governors of the International Atomic Energy Agency (IAEA) -- the UN's nuclear watchdog -- passed a resolution this month telling Iran to return to a full freeze.

Iran has refused, despite explicit threats -- including one from French President Jacques Chirac -- that it faces referral to the UN Security Council.

In a separate announcement, state television said hardline President Mahmoud Ahmadinejad had decided to keep on Gholam Reza Aghazadeh as head of the Atomic Energy Organisation and one of his seven vice presidents.

The presidential decree called on Aghazadeh to "use scientists, specialists and the young and creative forces in the organisation and to materialise the four principles of my government" -- which are justice, kindness, serving the people and spiritual and financial elevation."

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