UPDATE 1-Rio Tinto says eyeing 10% of world potash market

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SYDNEY, July 25 (Reuters) - Rio Tinto Ltd/Plc (RIO.AX)(RIO.L) wants to grab 10 percent of the world potash market as demand for the fertiliser grows in step with biofuel production, Preston Chiaro, chief executive of Rio's energy and minerals unit said on Friday.

The push into a new commodity comes as Rio's board fights a $140 billion all-share takeover by rival BHP Billiton Ltd/Plc (BHP.AX), which it sees as too cheap and failing to appreciate Rio's growth plans.

Rio's main businesses are in aluminium production and mining iron ore, copper and coal.

Rio only produces a small amount of potash at present from a trial operation but hopes to dig new mines in Argentina and Canada starting in 2012, Chiaro said.

Global demand for potash stood at around 60 million tonnes a year and was growing at around 3 percent a year as more farmland is diverted away from food production to growing crops for energy, creating opportunities for new entrants, he said.

Shrinking world stocks have pushed grain prices to record highs and given farmers the incentive to use more fertilisers, resulting in large price increases for soil nutrients worldwide.

"Potash is critical to producing the world' s major crops and benefits from global demand for food and animal feed, plus biofuels," Chiaro said.

Rio was also looking to double uranium production within five years after earlier on Friday announcing plans to sell uranium to China for the first time from its Australian deposits, he said.

Rio mines uranium in Namibia in partnership with the government and owns 68.4 percent of Energy Resources Australia (ERA.AX), which mines a deposit in northern Australia and already supplies 10 percent of the world's needs.

Growth in uranium, as well as in other products Rio mines, would likely come via expanding existing operations rather than outright acquisitions, which could prove too costly, given record prices for coal, iron ore and other materials, he said.

"Frankly, everything is pretty high-priced right now," he said.

Rio has been selling off some of its assets to help recoup $15 billion of the $38 billion it spent buying Alcan of Canada last year.

It recently held discussions over selling its borates division in the United States and some two dozen groups have shown an interest in buying the U.S. energy coals division, according to Chiaro. ($1=A$1.04) (Reporting by James Regan; Editing by James Thornhill)