* Rockets, arms near southern border with Libya
* Algeria, Libya's other neighbours wary of Libyan turmoil
* Al Qaeda local affiliate, other Islamists operate in area
By Lamine Chikhi
ALGIERS, Oct 24 (Reuters) - Algerian troops discovered a huge arms cache near the border with Libya, including hundreds of surface-to-air missiles, rockets and landmines, an Algerian security source said on Thursday.
"It is an arsenal of war," the source, who asked not to be named, told Reuters, adding that it likely belonged to militants.
Algeria is worried about violence spilling over from neighbouring Libya, where a fragile central government is struggling to contain militias and Islamist militants operating in its lawless southern desert.
The source said the cache was found in Illizi in southern Algeria, about 200 km (125 miles) from the Amenas gas plant, which Libyan-based Islamist militants attacked in January, killing nearly 40 foreign contractors.
The weapons included 100 anti-aircraft missiles, more than 500 MANPAD shoulder-launched rockets often used against low flying aircraft like helicopters, and hundreds of rocket launchers, rifles, landmines and rocket-propelled grenades, the source added.
He did not give further details on how or when the arms were recovered.
Two years after its civil war toppled Muammar Gaddafi, Libya is still awash with weapons from the former leader's regime and the militias who fought him.
Tunisia's Prime Minister Ali Larayedh told Reuters last week Islamist militants were taking advantage of Libya's chaos to get training and weapons across its porous border with Tunisia.
The attack on the Amenas gas installation and Libya's chaos have left energy companies wary over security in North Africa. BP and Norway's Statoil are still assessing whether to send foreign workers back to Amenas.
"Algeria is a target for al Qaeda cells who may have been planning a major attack, maybe disrupting air traffic or striking military aircraft or helicopters, which are the best tools to track terrorists in the desert," said security analyst and Ennahar TV editor Anis Rahmani.
As well as Al Qaeda in the Islamic Maghreb, other militant groups in North Africa include Ansar al-Sharia both in Tunisia and Libya, and the Movement for Unity and Jihad in West Africa or MUJWA, scattered this year by the French offensive in Mali.
MUJWA recently announced it was joining forces with another group led by veteran Algerian fighter Mokhtar Belmokhtar, who masterminded the attack on the Amenas plant in January.
Seven Tunisian police were killed on Wednesday in gun battles with militants in Tunisia, where the government two months ago began a crackdown on Islamist hardline, Ansar al-Sharia, blamed for killing two opposition leaders.