Algerian special forces on Thursday launched a rescue operation on a desert gas complex, killing fleeing Islamists and an unknown number of their hostages, the communication minister said.
Communication Minister Mohamed Said said a number of kidnappers had been "neutralised" as they tried to flee, in the first official comment on the operation, but admitted that "some" hostages were killed or wounded.
He did not give any casualty figures from the operation which ended late on Thursday, according to Algeria's APS news agency, amid reports that scores of people had died.
According to a source quoted by Reuters, eight Algerians, two Japanese, two Britons and one French national were among those killed. This has not been confirmed.
Earlier, one of the al-Qaeda-linked Islamists said "warplanes and ground units" had begun an operation "to take the complex by force," and threatened to "kill all the hostages if the Algerian forces succeed in entering the complex."
He said 34 hostages and 15 kidnappers were killed in an army air strike, a claim that could not be verified.
APS said the army freed four foreigners -- two Britons, a Frenchman and a Kenyan -- and 600 Algerian workers held hostage at the In Amenas plant in southeastern Algeria.
The communication minister said that a peaceful solution to the crisis would have been preferred, but accused the heavily armed Islamists of "brinkmanship."
He said the attack on the major gas complex, jointly operated by BP, Statoil and Sonatrach, was the work of a "multinational terrorist" organisation that wanted to "implicate" Algeria in the Mali conflict and destroy its economy.
Late on Wednesday, Interior Minister Dahou Ould Kablia had insisted that Algiers would not negotiate with the "terrorists."
On Thursday, he told the online edition of Algeria's Arab-language daily Echorouk the hostage-takers had come from Libya.
The Islamists launched their attack at dawn on Wednesday, killing two people, including a Briton. They also took scores of Algerians and 41 foreigners hostage, among them American, British, French, Irish, Norwegian and Japanese.
The gunmen said their attack was in retaliation for Algiers supporting French air strikes in Mali, and demanded that 100 radical Islamists held in Algeria be released and sent to northern Mali in exchange for the hostages.
The Islamists on Thursday called on the army to pull out of the area to allow negotiations to begin, and said Algerian snipers had fired at the site where the hostages were held, wounding a Japanese.
On Thursday morning a Briton, a Japanese and an Irishman, identified as hostages, appeared on Al-Jazeera, demanding the withdrawal of Algerian troops.
Foreign governments voiced growing concern about the rescue operation which a foreign diplomat in Algiers said "did not go too well for the hostages."
British Prime Minister David Cameron postponed a major EU speech planned for Friday because of the crisis and warned that Britain should brace itself for "the possibility of bad news."
Norway said it had no news on nine of its citizens, and Japan, whose engineering firm JGC had said five of its workers were believed to have been seized, demanded that the rescue mission be stopped "immediately."
Dublin said an Irish passport-holder from Belfast was free and in good health.
APS reported that some 30 Algerians managed to escape, while private TV channel Ennahar said 15 foreigners, including a French couple, had also escaped.
