Envoys to the six-party talks on the Korean Peninsula nuke issue on Friday were examining a Chinese draft document that could see them take the first steps towards denuclearization of the Korean Peninsula.

A general view of the opening ceremony of the six-party talks on North Korea's nuclear programme in Beijing February 8, 2007. [Reuters]

"The chief negotiators had a practical and in-depth exchange of views on the first steps of implementing the joint statement," a statement of Chinese Foreign Ministry said at the end of Friday's session, without releasing more details.

Under the joint statement reached in September 2005, the Democratic People's Republic of Korea (DPRK) agreed to abandon its nuclear program in exchange for economic aid and security guarantees.

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The talks entered the second day on Friday, with negotiators having a group meeting and a series of one-on-one talks.

They were said to comb through the draft looking for a possible agreement. The draft was said to be circulated to the delegates last night.

"The Chinese delegation circulated a draft, but we haven't had much discussion yet....it's a process that begins with discussion and moves to the written form," chief U.S. negotiator Christopher Hill told reporters Friday morning.

Reports said the draft agreement proposed stopping within two months work at nuclear sites in the DPRK, including the Yongbyon reactor, and supplying Pyongyang with alternative energy sources.

Later Friday, Chinese Vice Foreign Minister Dai Bingguo held a banquet for the six top negotiators at the Diaoyutai State Guesthouse.

"The facts show that the six-party talks are an effective mechanism to resolve the Korean Peninsula nuke issue," Dai said in his toast.

As long as all parties continue the talks in a spirit of sincerity and perseverance, the difficulties can be overcome, Dai said.

Hill said after the banquet that the parties were fairly close to a deal but sticking points remain.

"A couple of issues are sticking points, just one or two issues. That sounds pretty close to a deal," he said, adding these issues are "not broad issues, but pretty limited in fact".

"We will definitely get through the remaining issues and we will move along," Hill said with cautious optimism.

He had lunch with the DPRK delegation and Kim Kye-Gwan on Friday, in which "we looked ahead to the next phase."

Hill stressed that "we are not interested in freezing things but in shutting things down and continuing through various phases to shut down, dismantle, abandon things... we are interested in a kind of one-way process."

Japanese negotiator Kenichiro Sasae said there had been little prospect of an agreement so far.

"We made progress on some parts but on others we ran into difficulty. We will continue with the talks, but at this point in time I don't feel there is a prospect of reaching an agreement," Sasae said when he came back to the hotel Friday evening.

Im Sung Nam, an official from the Republic of Korea (ROK) delegation, said Friday evening the parties had reached consensus on parts of the draft, and some parts were still under discussion.

The six parties "have achieved consensus to a certain extent", Im said at a ROK press conference Friday evening.

He said Friday's consultation was sincere and pragmatic. The ROK and Chinese chief delegates had bilateral consultations in the afternoon. The ROK and DPRK chief delegates had a 30-minute talk. The ROK and U.S. top delegates are also maintaining contact.

However, another ROK official was more cautious about the prospects, saying anonymously that the consultations are more difficult than expected, and all sides still need to show wisdom and make further efforts.

After a 48-day recess, the negotiators gathered again in Beijing on Thursday to explore the first steps needed to implement the statement.