The move, a key stage in the nuclear fuel cycle, is one which US officials have charged could produce enough material to make several atomic bombs.

Iranian atomic energy chief Reza Aghazadeh told reporters in Vienna that some of the 37 tonnes of uranium yellowcake, or ore, which Iran had previously said it would be converting had now been used.

"Tests have been successful," he said and "have to be continued using the rest of this material."

Yellowcake is converted into uranium gas which is then fed into centrifuges to make enriched uranium.

Enriched uranium can be fuel for civilian reactors, but also the explosive core for atomic bombs.

The United States, which charges that Iran is secretly developing nuclear weapons, said that industrial-scale uranium conversion, even if Tehran only designated this as "tests", would be an alarming sign that Iran is continuing its alleged quest of the bomb.

Aghazadeh said that Iran has the centrifuge technology in place in order to convert the gas feedstock into enriched uranium if it so decided.

His announcement at a general conference of the International Atomic Energy Agency (IAEA) here was the first confirmation that Iran had actually begun the large-scale conversion.

The IAEA, the UN nuclear watchdog, had Saturday urged, at a board of governors meeting, Iran to "immediately" to suspend all parts of the nuclear fuel cycle, including conversion activities.

The agency set a deadline of November 25, when its board of governors will next be meeting, for a definitive review of Iran's nuclear program.

The United States is pushing for Iran to be sent to the UN Security Council, which can impose punishing sanctions.

Aghazadeh said Iran did not recognize the validity of the IAEA demand for Tehran to halt uranium enrichment, as enrichment is allowed under the nuclear Non-Proliferation Treaty (NPT), whose rules are monitored by the watchdog.

He said Iran would decide, "based on our national interest," what it would do about enrichment.

Aghazadeh said that it was "possible" Iran would honor the IAEA demand as a gesture to help persuade the IAEA to drop its investigation of Tehran's nuclear program at the November 25 board of governors meeting.

He reiterated Iran's position that its suspension of uranium enrichment, agreed on with Britain, France and Germany in October 2003, was "based on a voluntary gesture."

The voluntary nature of the suspension "has been the case and will be the case," Aghazadeh said.

While Iran has suspended actual enrichment, it has not suspended support activities, such as making centrifuges and converting yellowcake into uranium hexafluoride (UF6) gas.

IAEA spokeswoman Melissa Fleming said the IAEA knew of the conversion test and had "all the necessary safeguards verification measures in place" but still "continues to call on Iran, as did the board, to suspend such a test as part of their confidence building measures."

The IAEA had already noted on September 1 that Iran had indicated it would resume large-scale production of uranium gas.

Its report said Tehran plans "a large-scale test of (converting) 37 metric tonnes of yellowcake (uranium in mineral form)" into uranium hexafluoride, the gaseous "feed-stock" for enriching uranium to what can be bomb-grade levels.

Iran had conducted a smaller test in May and June 2004 for making UF6, the report said.

Experts close to the IAEA said then that upcoming production of the uranium hexafluoride would produce a "significant amount" of the gas, an amount that would be enough to produce enough enriched uranium that could produce at least one atomic bomb.

US officials said that if all 37 tonnes of yellowcake were converted, that could produce enough enriched uranium to make up to five bombs.

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