By Marwa Awad

CAIRO, Aug 29 (Reuters) - Egypt's military said on Wednesday it would broaden its offensive against militants in the Sinai Peninsula, a campaign that has raised concerns in Israel about the movement of heavy armour into the area near its border.

After militants attacked and killed 16 border guards on Aug. 5, Egypt launched an operation using the army and police to raid militant hideouts, arrest suspects and seize weapons, including rockets and other arms, that are rife in the area.

Disorder has spread in Sinai since former President Hosni Mubarak's overthrow last year. Analysts say Islamists with possible links to al Qaeda have gained a foothold. This has alarmed Israel.

Israeli officials have privately voiced concerns about heavy equipment being sent to areas where there are restrictions on weapon deployments under a 1979 peace treaty.

Egypt has sent hundreds of troops, along with tanks, armoured vehicles and helicopters into the North Sinai region since the start of military operations there on Aug.8.

Egyptian President Mohamed Mursi told Reuters on Monday in his first interview with international media that Egypt was committed to all treaties and, without naming Israel, said no other states should worry about its actions in Sinai.

"As of the morning of Aug. 29, in continuation of the military operation, there will be a redeployment of forces in various locations in Sinai to complete the hunt for terrorist elements," the Defence Ministry said in a statement.

A military source told Reuters this would involve spreading security forces over a wider area to root out militants.

The campaign is led by the defence minister and head of the armed forces, General Abdel Fattah al-Sisi, appointed by Mursi in a shake-up of the military top brass on Aug. 12. The Islamist president has promised to restore order.

Sisi briefed Mursi on the Sinai operation on Monday.

The ministry statement on its website said 11 militants had been killed and 23 arrested in the campaign. It said 11 vehicles had been seized, along with ammunition, including five boxes of Israeli-made ammunition, but did not give details.

WEAPONS SMUGGLING

The 1979 peace treaty limits the military presence in the desert peninsula though in recent years Israel has agreed to allow Egypt to deploy more forces there to stem weapons smuggling by Palestinian gunmen and crime.

An Egyptian security source said on Wednesday tanks were being withdrawn from the border area in a move that could calm Israel's concerns. Three other security sources confirmed this and said the tanks were being moved to another part of Sinai, without giving further details.

No one had yet claimed responsibility for the killing of the border guards. But a Sinai-based Islamist militant organisation, the Salafi Jihadi Group - which denies any involvement in the attack - warned the Egyptian army last week that the crackdown would force it to fight back.

Leaders of the Cairo-based Jihad Group, which fought against Mubarak but has since renounced violence, met earlier in the week in Sinai with members of the Salafi Jihadi Group in an attempt to defuse tensions.

"We went to prevent a new rivalry with the state," said Magdy Salem, a member of the Cairo group. He said the visit was approved by Mursi.

The unrest has occurred mainly in North Sinai, where many people have guns and where Bedouin tribes have long complained of neglect by central government. They say they have seen no benefits from the expanding Sinai tourist resorts.

Mubarak's military-backed government worked closely with Israel to keep the region under control. Diplomats say security contacts continued after Mubarak's fall. But Egyptian security sources said Israel should not expect day-to-day reports.