Islamist militants have attacked and occupied a northern Mozambican village in their closest raid yet to a giant gas project, military sources told AFP Tuesday.

Jihadists launch an assault late Monday on the village of Mute, located about 20 kilometres (12 miles) from the Afungi peninsula -- the centre of a multi-billion-dollar scheme to build a liquefied natural gas (LNG) plant in Cabo Delgado province.

The attackers targeted government soldiers in the village and torched homes.

"After the terrorists attacked our position, reinforcements were sent to repel the attack," said an unnamed senior military source based in Palma, the provincial capital.

"At this point the clashes on the ground continue" the source said early Tuesday.

Mute lies in a buffer zone between the gas project and the jihadist-controlled port of Mocimboa da Praia.

The attack has raised concerns about security at the Afungi peninsula, where the French energy major Total and the United States' Exxon Mobil are among the investors, the military source said.

According to another military source, air force reinforcements from a private military contractor, Dyck Advisory Group have been deployed from Pemba to shore up government troops seeking to retake Mute.

The US State Department's counterterrorism coordinator, Nathan Sales, who has just returned from a working visit to Mozambique, condemned the outsourcing of military work to commercial outfits to fight extremist violence.

Map of Mozambique locating Cabo Delgado province and Pemba
Map of Mozambique locating Cabo Delgado province and Pemba AFP / Gillian HANDYSIDE

"The way to fight terrorists is not to send in a bunch of mercenaries, to loot natural resources and then abscond," Sales said on Tuesday during a telephone press conference hosted from Washington.

A police spokesman in Cabo Delgado did not return calls seeking comment.

Jihadists have stepped up attacks in recent months in a declared campaign to create a caliphate in the gas-rich region.

Violence has claimed more than 2,300 lives since October 2017, according to the US based NGO Armed Conflict Location & Event Data Project, while the government says at least 500,000 people have fled their homes.

President Filipe Nyusi has said his government was "open to any support offered to combat terrorists".

The United States last week expressed its "keen" interest in partnering with Mozambique to tackle terrorism.

"What we need to do is to make sure that we in the US are making available to our Mozambican partners every capability that we have to help them degrade and ultimately defeat that terrorist threat," Sales said.

He said South Africa "has a special role to play" in combating the insurgency "as an economic power, as a military power, as a strong democracy that much of the rest of the continent looks to for inspiration and leadership."

"I'm hoping we'll be able to find ways to partner together with ... Pretoria to degrade and defeat terrorist threats in this part of the continent," he said.