The Ta'ang National Liberation Army (TNLA) launched attacks on junta troops earlier this week in Mandalay region and neighbouring Shan state, shattering a ceasefire brokered by China in January.

Its fighters were inside Mogok, a town surrounded by hills rich with rubies, sapphires, spinel, aquamarine and other semi-precious stones, General Tar Bhone Kyaw told AFP, without giving details.

AFP was unable to reach a junta spokesman for comment.

Mogok residents told AFP the town had been hit by artillery shelling and air strikes by military planes since fighting in the area started on Tuesday.

"As far as I know, four people including two women were killed yesterday because of artillery shelling," one 57-year-old Mogok resident, who did not want to give his name, told AFP.

He said he and his family were sheltering elsewhere after the roof of their home had been damaged in an air strike.

"We have no experience like this. It's the first ever serious fighting in Mogok town."

Myanmar produces much of the world's rubies, and top quality stones from Mogok -- known as "pigeon's blood" for their deep red colour -- can fetch more per carat than diamonds.

The industry is notoriously opaque, with high-value rubies often smuggled over the border into Thailand or China to be sold directly to private buyers or made into jewellery.

For decades Myanmar's junta and its opponents have taxed local miners for income.

Fighting was ongoing in Kyaukme town in neighbouring Shan state, a local rescue worker told AFP on Friday.

At least 10 civilians had been killed and more than 20 wounded there since clashes broke out on Tuesday, he said.

The fighting has breached the China-brokered ceasefire that earlier this year ended weeks of fighting in Shan state between the military and the TNLA and two other allied ethnic armed groups.

In a surprise October offensive the alliance seized swathes of territory and several lucrative trade crossings with China, dealing the junta its biggest blow since it seized power.