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TWO Russian-built helicopter gunships belonging to a mercenary outfit are gathering dust and rust at an RAAF base, more than six years after they were taken there after the 1997 Papua New Guinea-Sandline fiasco.

The RAAF continues to store the choppers rent-free at the Tindal base in the Northern Territory after plans to sell them to the Nepalese army fell through last year.

The helicopters were at the centre of the controversial $49 million contract between the PNG Government and mercenary company Sandline International to supply weapons and manpower to assist PNG's war in Bougainville in 1997.

Last year they were nearly sold to the Royal Nepalese Army for $8.4 million to be used against Maoist rebels.

A Sandline spokesman said negotiations were advanced to make a sale to another, un-named party.

The two Hind Mi-24 gunships were part of a $20.4 million package - including assault rifles, rocket-propelled grenades and hundreds of thousands of rounds of ammunition - supplied by Sandline to PNG.

But they were instead diverted to Australia in March 1997 when the secret mercenary plan became public and was aborted at the 11th hour.

The armaments were intended to only stay in Australia for a few months.

There was then a long legal battle between PNG, Sandline and other parties about who owned the armaments, and what should be done with them.

Considered among the world's best attack helicopters, the Mi-24s were originally used by the Soviet Union in Afghanistan in the 1980s.

They are believed to have been bought by Sandline on the East European arms market.

Two other Russian-made helicopters also intended for PNG - Hind Mi-17 troop carriers - were sold in 1999.

But it has been more difficult to dispose of the gunships because of their military classification.

Responding to the Herald Sun, the Defence Department said the helicopters were in storage at RAAF Tindal on behalf of Sandline and remained Sandline's property.

Sandline spokesman Michael Grunberg said negotiations for the sale were in train with a potential customer entitled to acquire such systems.

"Any sale of the helicopters will, of course, be in full compliance with both Australian law . . . and any relevant international laws and regulations," he said.