ALGIERS - Algeria will sell a 49 percent stake in its state steel plant to Dubai-based Emarat Dzayer Group, the prime minister's office said on Tuesday, as the North African country seeks to attract foreign investment and diversify its economy.

The deal will include a 160 billion dinar ($1.44 billion) investment to develop the El Hadjar plat, in the eastern province of Annaba, it said in a statement on its website.

"The Council of State's Capital Participation (CPE) has given its agreement for the conclusion of an industrial partnership between El Hadjar complex and Emarat Dzayer," the statement said. It gave no details.

The plant has been fully owned by state firm Imetal since ArcellorMittal terminated a deal in late 2016, handing over to the Algerian government a 49 percent stake it had been holding in the factory after failing to increase output.

Production at the plant is currently around 300,000 tonnes of steel per year, while the government aims to raise to 1.2 million tonnes in the short term.

Algeria imports most of its steel needs.

The government had signed a deal with Qatar Steel to build a second factory, in the eastern province of Jijel, with planned annual production capacity of 2 million tonnes.

(Reporting by Hamid Ould Ahmed Editing by Ulf Laessing and David Evans) ((hamid.ouldahmed@thomsonreuters.com;))