French President Francois Hollande has confirmed that a body found in northern Mali was that of a geologist who was abducted by Islamist militants two years ago.

"The death of our compatriot, Philippe Verdon, has been formally confirmed," Hollande said.

Verdon, 53, was kidnapped by Islamist militants with Al-Qaeda in the Islamic Maghreb (Aqim) in eastern Mali in November 2011 along with another French citizen.

"The body will be transferred to France as quickly as possible and the autopsies will allow us to find out the cause of his death," Hollande said.

As the government waited for confirmation of the identity of the dead, Hollande vowed to punish those responsible.

"We are going to analyse the causes of the death and nothing will go unpunished," the president said.

A source told Radio France Internationale that the body was retrieved by French troops in the city of Tessalit, near the Algerian border.

Aqim announced in March that it had executed Verdon in retaliation for France's military intervention in Mali but there was no proof that it had carried out its threat until now.

Paris sent troops to the west African county to fight an Islamist insurgency which threatened to overrun the capital of Bamako in January.

Verdon was reportedly on a business trip when he was abducted from his hotel in the city of Hombori, together with Serge Lazarevic.

Family and friends denied that Verdon had links with mercenary groups or the secret services and said he was suffering from an ulcer and tachycardia when abducted.

"It is possible he died because of his disease and Aqim used [his death] as propaganda," Pascal Lupart, the director of a support group, said.

Lazarevic remained in captivity as one of seven French nationals held by Islamist groups in Mali.

"The government is doing all it can to assure their freedom and return to France," Hollande said.