By Giles Elgood and Nidal al-Mughrabi
JERUSALEM/GAZA (Reuters) - Israel will go on fighting Hamas in the Gaza Strip even after the army completes its core mission of destroying the cross-border tunnels used by Palestinian militants to attack its territory, Prime Minister Benjamin Netanyahu said on Saturday.
As Israeli television showed live footage of some tanks withdrawing from Gaza in an apparent winding down of the 25-day campaign, Netanyahu said Hamas would pay an "intolerable price" if it continued to attack Israel.
Israel began its air and naval offensive against Gaza on July 8 following a surge of cross-border rocket salvoes by Hamas and other guerrillas, later escalating into ground incursions.
Shelling exchanges continued earlier on Saturday, pushing the Gaza death toll given by Palestinian officials up to 1,675, most of them civilians. Israel has confirmed that 63 soldiers have died in combat, while Palestinian shelling has also killed three civilians in Israel.
Netanyahu's comments came as Israel signaled it was taking action to withdraw on its own terms, saying it would not attend talks in Cairo this weekend aimed at achieving a new truce.
In some areas of Gaza, witnesses saw Israeli tanks pulling back towards the border, while the Israeli military gave Palestinians who had fled one town the all-clear to return.
Israel's main goal in its incursion into Gaza last month was to destroy Hamas's network of tunnels, and the IDF (Israel Defence Forces) said they were close to achieving that.
More than 30 tunnels and dozens of access shafts have been unearthed and were being blown up, the military said.
"Our understanding is that our objectives, most importantly the destruction of the tunnels, are close to completion," a military spokesman, Lieutenant-Colonel Peter Lerner, said.
Netanyahu said in a televised speech that military action would continue even after that goal is achieved.
"After completing the anti-tunnel operation, the IDF will act and continue to act, in accordance with our security needs and only according to our defense needs, until we achieve our objective of restoring security to you, Israel's citizens," he said.
"PAY FOR EVERY MINUTE"
Hamas said it was absurd for Israel to claim to have destroyed all the tunnels. "Netanyahu will pay for every minute he spends carrying out more aggression against our people," a spokesman said.
Several ceasefires between Israel and Hamas, the Islamist movement that dominates the Gaza Strip, have failed to take hold or quickly collapsed, most recently on Friday after two Israeli soldiers were killed and a third went missing in an ambush.
Israel accused Hamas of seizing Second-Lieutenant Hadar Goldin, and the United States blamed the group for a "barbaric" breach of the truce. The United Nations was more guarded in its censure of Hamas but demanded Goldin's release.
Israeli forces have been searching for Goldin in southern Gaza, but his family expressed alarm at reports of an Israeli pull-out.
"I demand that the State of Israel not leave Gaza until it brings my son home," Goldin's mother, Hedva, told reporters.
Hamas said it believed its gunmen had struck before Friday's ceasefire began and that if they captured Goldin, he probably died with his captors in heavy Israeli barrages that followed.
In Cairo, a Palestinian delegation arrived for new truce talks, which would include Hamas's demand Egypt ease movement across its border with blockaded Gaza. Turning its back on those negotiations, Israel said it would not send envoys as scheduled.
"They (Hamas) cannot be trusted to keep their word. They cannot stop (firing) because, for them, a ceasefire at this stage, whether by arrangement or not by arrangement, would mean acknowledging the worst possible defeat," Deputy Foreign Minister Tzachi Hanegbi told Israel's Channel Two TV.
Hamas, its guerrillas massively outgunned by a Jewish state it considers an eternal enemy, said it would prevail.
Any unilateral pullout by Israel would mean "it has failed to achieve any of its goals and would be a clear defeat for the occupation army and for its leaders," Hamas's bloc in the Palestinian parliament said in a statement. "Gaza resisted, endured and will achieve victory."
Israel said Palestinians on Saturday launched 74 rockets across the border, most of which fell harmlessly wide while seven were shot down by its Iron Dome interceptor, including over Tel Aviv.
Crowded Gazan towns close to the Israeli border have seen devastating clashes and the flight of tens of thousands of Palestinians as tanks and troops swept in to confront dug-in guerrillas.
The Palestinian Centre for Human Rights said 520,000 people had been displaced by the fighting - more than a quarter of Gaza's population.
Israel said on Saturday evacuees from Beit Lahiya, a northern town of 70,000 residents, could return. But fear still gripped the townspeople.
"No one has told us to go back," said Talab Manna, a 30-year-old father of seven camped out at a U.N.-run school serving as a refugee haven. "We can't risk going back and being bombed by the Israeli forces."
Quoting a senior military officer, Israel Radio said the condition of the missing soldier was not known. It said Goldin was last seen next to the two troops killed by a Hamas suicide bomber - suggesting he may not have survived and his captors had a corpse.
Hamas had long threatened to capture Israelis for a prisoner swap. In 2011, Israel released more than 1,000 Palestinian prisoners in exchange for Gilad Shalit, a soldier snatched by Hamas five years earlier. Israel has twice freed prisoners for the bodies of soldiers held by Lebanon's Hezbollah militia.
The Rafah clash in which Goldin was reported to have been captured triggered Israeli shelling from the middle of Friday morning that killed 150 Palestinians. By afternoon, Israel declared an end to the truce - which was meant to have lasted 72 hours.
Rafah residents said they had received recorded telephone warnings from Israel to stay indoors during a barrage that wreaked widespread ruin.
"It was like an action movie - explosions everywhere, cars flying up in flames, people crushed under houses that were bombed," local man Bassim Abed told Reuters.
(Additional reporting by Dan Williams and Ori Lewis in Jerusalem, Mostafa Hashem and Oliver Holmes in Cairo; Editing by Robin Pomeroy)