Mozambican troops are honing in on a forest base camp belonging to insurgents terrorising the gas-rich north, the government has said, signalling a significant advancement in the battle to regain control of the region.

A shadowy insurgency has wreaked havoc in Mozambique's Cabo Delgado province over the past three years, targeting villages and towns in a bid to establish an Islamist caliphate.

The group has stepped up its offensive in recent months, seizing swathes of territory near major liquefied natural gas (LNG) investment projects.

Interior Minister Amade Miquidade late Wednesday told lawmakers the army had dismantled several "hideouts in the woods" and was advancing on a central base hidden in the heavy forest of Mocimboa da Praia district.

"Terrorists have a main base that they call 'Syria', where our operations are focused," Miquidade said during a parliamentary session called to brief cabinet members on counter-insurgency tactics.

"We are putting out of action some of their leaders who are of foreign nationality," he added, refusing to elaborate.

Details about the targeted group are sketchy. It calls itself Al-Shabab although it has no known links to the group of that name operating in Somalia, and last year pledged allegiance to the so-called Islamic State group.

It has staged more than 600 attacks across 10 out of the 17 districts in Cabo Delgado, according to a US-based NGO, the Armed Conflict Location & Event Data (ACLED) group.

ACLED has also documented more than 2,000 deaths, at least 1,100 of them civilians.

Miquidade said the unrest had displaced over 435,000 people, 100,000 of whom fled their homes in the past month alone.

He noted the threat to LNG exploration projects and defended the hiring of private military companies to boost security.

It is the first time the government openly acknowledged its collaboration with the private military sector.

The gas projects "have specific security dynamics and the continuity of these investments requires specialised security means which Mozambique does not have," the minister explained.

French energy giant Total signed a security agreement with Mozambique in August to protect its multi-billion-dollar LNG project on the Afungi peninsula.

Militants remain in control of Mocimboa da Praia town, a strategic port 60 kilometres (40 miles) south of the LNG facility.

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