UPDATE 1-Yara to buy Canadian nitrogen plant for $1.6 bln

NEW YORK, July 14 (Reuters) - Norwegian fertilizer producer Yara International ASA (YAR.OL) is buying the Saskferco Products ULC nitrogen plant, jointly owned by U.S. fertilizer company Mosaic Co (MOS.N) and the provincial government of Saskatchewan, for C$1.6 billion ($1.6 billion).

The plant, located in Belle Plaine, Saskatchewan, is one of the largest in the world and produces urea, anhydrous ammonia and urea ammonium nitrate. It is set to expand next year.

The deal is expected to close in the third quarter.

Mosaic, which has a 50 percent stake in the 16-year-old plant, will use the proceeds of the sale to expand its potash mines in Saskatchewan, Mosaic's president Jim Prokopanko said in a statement. In June, the company had said it planned to expand potash mining capacity in Saskatchewan by 5.1 million tons in the next 12 years.

Yara is expected to report a nearly 170 percent rise in second-quarter pretax profit, helped by strong fertilizer prices, when it releases its quarterly results on Tuesday.

Tight supplies and soaring demand have pushed grain prices to record levels, pulling along fertilizer prices because farmers have the means and motivation to boost yields.

The boom has been particularly strong for producers of potash, a hard-to-mine nutrient produced only in a dozen countries. A major deposit lies beneath the Canadian prairies.

Prices for potash have tripled during the past year.

The transaction is subject to regulatory approval in Canada.

CIBC World Markets is acting as a financial advisor to Saskferco. (Reporting by Phil Wahba; Editing by Gary Hill)