IAEA spokesman Mark Gwozdecky told AFP Iran had signalled it was ready to move towards signing an additional protocol to the nuclear Non-Proliferation Treaty (NPT) that would pave the way for such inspections.

Tehran's decision to bow to international pressure on the matter was mentioned and praised in an IAEA report on its nuclear program handed to the body's board of governors Tuesday, he said.

"The fact that Iran agreed to start negotiations on concluding an additional protocol is a positive step," Gwozdecky quoted the report as saying.

The Iranian government confirmed that it was open to signing a protocol but first wanted "total" guarantees that IAEA inspectors would not be given complete freedom of movement and would not violate military secrets.

"We are still negotiating and we have a positive approach" to the protocol, said government spokesman Abdollah Ramezanzadeh at a news conference in Tehran.

"We have not decided when" to make the decision, but "we will undertake nothing without total guarantees."

The United States accuses Iran of secretly trying to develop nuclear weapons and the IAEA states in its report that signing and implementing an additional protocol is the only way to allay such fears.

The document says the Iran has in recent months stepped up cooperation with IAEA inspectors, but the body remains worried about numerous issues regarding the Islamic republic's nuclear program.

"There are still a number of outstanding issues, particularly with regard to Iran's enrichment program, which require urgent resolution," Gwozdecky said.

"Continued and accelerated cooperation and full transparency on the part of Iran is essential if we are to resolve them," he added.

The United States turned up the heat in June after it was reported that enriched uranium was found near one of Iran's main nuclear sites, a substance the IAEA says is not necessary for a civilian nuclear program.

A diplomat who has studied the report told AFP it confirms that the IAEA had found traces of enriched uranium at or near the town of Natanz, where Tehran is building a uranium processing plant.

IAEA secretary general Mohamed ElBaradei called the discovery "very worrying" in an interview published in the German magazine Stern Tuesday

"We took samples and found traces of highly enriched uranium.It is very worrying. If it emerges Iran is not using its nuclear programme for peaceful purposes, it could have terrible consequences."

ElBaradei will formally present the IAEA report to its board of governors when they start reviewing Iran's case on September 8, with the threat that it might be forwarded to the UN Security Council.

A source close to the IAEA told AFP Tuesday that secretariat would probably resist attempts by Iran to attach conditions to the protocol but the board will have the final say.

"If there are conditions attached, we will probably resist that. But the final decision lies with the board of governors."

Iran is at present only obliged to accept pre-arranged visits to sites it chooses to declare, but an additional protocol would allow IAEA inspectors to give as little as two hours' notice before visiting facilities.

Gwozdecky said IAEA inspectors have visited new sites in Iran on five trips to the country since June and was "in receipt of much new information from the Iranian authorities".

But he stressed implementing a new protocol was "the only way to build high confidence in the peaceful nature of their nuclear program."

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