JERUSALEM, Oct 28 (Reuters) - Israel's defence ministry

said on Monday it had signed a 2 billion shekel ($536-million)

deal with local contractors to expand production of a new

laser-based missile defence system that could be operational in

the next year.

The deal signed with state-owned Rafael Advanced Defense

Systems and Elbit Systems is for a high-power laser

called Iron Beam that is designed to counter aerial threats,

including rockets, mortar bombs, drones and cruise missiles.

It will supplement the Iron Dome system, which shoots down

rockets and missiles fired at Israel, using radar-guided

missiles to blow up short-range threats.

Eyal Zamir, the director general of Israel's defence

ministry, said the Iron Beam deal "heralds the beginning of a

new era in warfare."

Iron Beam is seen by experts as a much cheaper alternative

for neutralising enemy rockets and drones than the interceptor

missiles Israel currently uses.

($1 = 3.7290 shekels)