By Maria Golovnina and William Maclean

NORTH OF BANI WALID/TRIPOLI, Libya, Sept 12 (Reuters) – – Libya’s new rulers said they were holding back an assault on one of the last bastions loyal to Muammar Gaddafi but were edging towards the ousted ruler’s birthplace of Sirte.

Southern neighbour Niger said on Sunday one of the fugitive former leader’s sons, Saadi Gaddafi, had turned up there after crossing the remote Sahara desert frontier.

The National Transitional Council (NTC), which is trying to exert its control over the entire country three weeks after its fighters stormed Tripoli, said it planned to unveil a new, more inclusive government in seven to 10 days.

It also said it had begun producing oil, Libya’s economic lifeblood, production of which had been all but halted throughout six months of civil war. In Tripoli, NTC fighters revealed they had captured Gaddafi’s foreign spy chief.

The NTC says it will not declare Libya “liberated” until it has taken control of towns still in the hands of Gaddafi loyalists. It had given holdout towns a deadline of Saturday to surrender and its fighters have been battling since Friday inside Bani Walid, 150 km (95 miles) southeast of the capital.

They said on Sunday they were meeting stiff resistance in Bani Walid, but were edging towards Sirte, which sits on the main east-west coastal highway, effectively cutting Libya in two.

Advancing NTC troops said the front line was about 90 km east of Sirte. Fighters were firing tanks and howitzers amid the sound of heavy machinegun fire and the roar of NATO warplanes overhead.   Continued…