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More than 50 people have been killed in fighting between a new rebel group and government troops in a remote town in South Sudan, and the "smell of dead bodies" is in residential areas, a church official said Wednesday.

Moses Peter, humanitarian co-ordinator of the Caritas Diocese of Wau, said he had seen 50 bodies at a mortuary in Wau town, which is about 650 kilometres northwest of the capital, Juba.

Thousands of people are sheltering at church and aid group sites and the local U.N. peacekeeping base, Peter said.

"The army, which is patrolling the streets here, has asked people to return to their homes but the displaced are still in fear," he said. "They do not want to return to their homes because they do not trust the army, because they say it is the army that killed civilians."

South Sudan's government said Tuesday a new rebel group had formed only months after the leader of another rebel group signed a peace deal to end a civil war.

The new rebel group has an Islamic fundamentalist agenda and includes former government troops, fighters from the Ugandan-led rebel group the Lord's Resistance Army and a Sudanese militia called the janjaweed.

Relief agencies are providing emergency assistance to displaced people in Wau following intense fighting on Friday and Saturday, according to the International Organization for Migration.

John Fredrick, a resident of Wau who was sheltering at a church compound, said his house had been burned, leaving him homeless.

"Many people have been killed," he said. "If the new governor doesn't come and address us and assures us about our security I will never return, I will never return again. I say I will never return home. It is better I am killed and buried here in the church."

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