MISRATA, Libya (Reuters) - Libyan forces fighting to free the city of Sirte from Islamic State forces have surrounded a conference hall in the area still held by militants after air strikes and clashes that killed at least three pro-government fighters, senior officials said.

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Forces allied with Libya’s unity government began a campaign two months ago to free Sirte from Islamic State, after militants took advantage of fighting between rival factions to gain territory and control the coastal city last year.

Three fighters were killed and more than 30 injured during fighting on Friday after Islamic State militants were driven out of the residential 700 district in fierce clashes involving rockets, mortars and gun battles, a senior commander and hospital officials said.

Commanders of the forces, who are mainly from the nearby port city of Misrata, say remaining Islamic State fighters are in an area around Sirte’s Ouagadougou conference complex and a nearby hospital. But snipers and landmines have slowed progress.

“Residential area 700 has been liberated and as of 6 p.m. the Ouagadougou center and the hospital are surrounded,” Mohamed Gnaidy, intelligence chief for Misrata forces told Reuters. “Our forces carried out air strikes on Ouagadougou.”

He said Misrata forces had also hit a house where several Islamic State commanders were hiding, but it was unclear how many casualties they suffered or how long it would take to clear out remaining militants in Sirte.

Misrata forces back the UN-supported unity government in Tripoli that is meant to replace two rival administrations and overcome the divisions among Libya’s various armed factions that slowly emerged after the fall of Muammar Gaddafi in 2011.

The battle in Sirte has been slowed by snipers and explosives as Misrata forces say they lacked the equipment and tactics to flush out militant gunmen among the villas and streets of central Sirte.

Any eventual fall of Sirte would be a huge blow to Islamic State in Libya, especially as the militant group is also facing setbacks in Iraq, where it has lost the city of Falluja and other territory to Iraqi forces.

Islamic State commanders in Iraq had sent emissaries to Libya, but the militants struggled to emulate its Iraqi and Syrian successes in the North African country, where they faced resistance from pro-government groups and also rival Islamist fighters.