Sources close to the talks said Ethiopia's Prime Minister Meles Zenawi and Eritrea's President Isayas Afewerki had stuck to their positions while mediators shuttled between them.

Ethiopia won't negotiate directly until Eritrea withdraws troops from around the frontier town of Badme. The Eritreans want the area put under neutral control until the location of the border is settled.

Eritrea gained its independence from its southern neighbour in 1993. It was an amiable separation, but followed many years of war which contributed to the downfall of the Ethiopian rulers who tried to retain control of the former Italian territory along the Red Sea coast.

A sudden dispute over the western end of their border erupted into war between the two Horn of Africa states last May.

Fighting died down when the rainy season set in but witnesses said on Friday that Eritrean forces had shelled the outskirts of the northern Ethiopian town of Adigrat last week.

President Blaise Compaore of Burkina Faso, heading an Organisation of African Unity mediation effort, told reporters they had held in-depth talks on a peace plan and would now wait for the two parties to give their views.

The mediators would take their replies, with the peace plan, to the OAU's central body for conflict resolution before the end of the year, he said.

"We will see then how we can push forward with getting these propositions materialised on the ground," he added.

The other mediatoprs are presidents Robert Mugabe of Zimbabwe and Hassan Gouled Hamadou of Djibouti.

U.N. Security Council members said on the eve of the talks that the two sides should settle their border dispute peacefully and stop deporting each other's nationals and United Nations staff.

In Mauritania on Sunday night, Annan, who comes from Ghana, called on Africans to settle their disputes peacefully.

The meeting of the mediation committee of Organisation of African Unity (OAU) on the Ethiopia-Eritrea border conflict is being attended by presidents Hassan Gouled Aptidon of Djibouti, Robert Mugabe of Zimbabwe and their host, Blaise Compaore, the continental body's current chairman.

Speaking at the first session's opening Saturday night, Compaore said it was imperative for Africa to strive to meet the region's peace-keeping demands, in spite of inadequate means.

The OAU chairman urged Eritrea and Ethiopia to be realistic and the mediators to "look for ways and means of ensuring the real unity of our people".

The African leaders held an initial closed-door session Saturday night to examine recommendations which were formulated by their foreign ministers Thursday and Friday.

Sources close to the ministerial talks said that divergences had emerged on the demarcation of the border between the two countries.

The three presidents were expected to hold separate meetings with the warring parties Sunday morning to iron out the difficulties.

Prime Minister Meles Zeenawi of Ethiopia said on arrival here Saturday that his delegation had come to Ouagadougou to look for "peace and justice."

The Eritrean President, Issaias Afwerki, said he was confident about a peaceful solution to the conflict which erupted in May.

OAU Secretary General Salim Ahmed Salim is also taking part in the deliberations of the committee which was put in place last June, following the outbreak of hostilities along the border between Eritrea and Ethiopia.

He said that the settlement of conflict has never been easy. He however, expressed the hope that the two disputing governments would adopt positive positions to facilitated the sending of an International force in the contested zone.