The probe was launched after police found documents recording a conversation between the then Secretary of State, William Whitelaw, and Cardinal William Conway, who discussed a priest who was suspected of being involved in the atrocity.

The revelation that new information is being assessed comes as Police Ombudsman Nuala O'Loan prepares to step down from her role within days.

Initially it was thought that Mrs O'Loan would release the document last November, almost four years after the PSNI revealed that rediscovered papers showed details of top level talks over a priest's alleged involvement in IRA terrorism.

However, the detailed report will now outlast her tenure and will come under the control of her successor, Al Hutchinson, who will take over on November 6.

A spokesman for the Ombudsman's office today said: "We have been working on the report intensively, but recently significant new information has come forward which we need to assess and this will take some time.

"It won't be doable in the current Ombudsman's tenure, but we are committed to completing the investigation and making the findings of that investigation known to the public.

"We hope to complete the report in the New Year."

While he was never questioned, historical documents show Fr James Chesney was moved from a south Londonderry parish to Donegal - where he died in 1980 - after the case was discussed privately by William Whitelaw and Cardinal Conway.

A police review was sparked by an anonymous letter, purportedly coming from a priest - which has never been authenticated - following which the Ombudsman began preparing a report.

He said RUC intelligence records linked him to the Claudy bomb and showed he provided an alibi for a person suspected of playing a prominent role in the blasts.

However in October of last year, veteran republican leader Ruari O Bradaigh said Fr Chesney told him in the late 1970s that he had "nothing whatever to do with the bombings" that ripped through the sleepy village.

Merle Eakin, whose nine-year-old daughter Kathryn was killed as she cleaned the window of a Main Street shop, said she has mixed feelings about the news.

"We were just saying the other night how we haven't heard anything for such a long time," she said.

"We do want to get it over with, but of course it will be good to get some answers after all these years. If new information is coming forward I suppose that is something."

The victims were: Elizabeth McElhinney (59), Joseph McCluskey (39), Kathryn Eakin (9), David Miller (60), James McClelland (65), Willie Temple (16), Rose McLaughlin (52), Patrick Joseph Connolly (15) and Arthur Hone (38).