Gardai suspect that republicans testing a new explosives mixture were responsible for a large crater found on isolated farmland a few feet north of the Border.
The crater (10 feet by 10 feet and six feet deep) was located by the Garda air support unit yesterday during joint searches by security forces following an explosion heard in north Louth/south Down on Thursday night.
The explosion was felt in Carlingford and Omeath and was heard across the Border in Warrenpoint and Kilkeel after 9.30 p.m. on Thursday.
A large flash was also seen in the sky which was probably produced by the chemicals in the mix of homemade explosives.
An initial search of land close to where the noise originated took place on Thursday night but failed to find anything.
Bad weather yesterday morning hampered aerial searches by the RUC and gardai, and it was not until close to teatime yesterday that the crater was spotted by airborne gardai.
It was on land adjacent to a derelict farmhouse, which was hard to reach on foot, between Clontygora and Cornamucklagh. It was approximately 10 yards into the North and six feet deep and the force of the explosion had thrown nearby metal over 30 feet.
The mixture appeared to have been detonated from an area above the crater which was behind rocks and apparently out of sight of British army observation posts.
Garda sources are satisfied this was a test of a new explosives mixture and sees it as further evidence that "military" republicans are determined to try to undermine the peace process.
The RUC is also investigating if a white van found burnt out near Meigh, Jonesboro, around an hour after the explosion was connected.