Rio refinery closure would strip $400m from NT economy

Rio Tinto's loss-making aluminium refinery in Arnhem Land should be shuttered, according to an internal review, with the expected loss of up to 1500 jobs and devastating effects on the regional economy.

An investment review committee recommended Rio immediately move to mothball the refinery on the Gove Peninsula, which together with a bauxite mine is the NT's largest private enterprise.

If implemented, the closure would likely to happen over six to 12 months and require detailed planning, technical preparation and employee consultation.

It would halve the size of the nearby town of Nhulunbuy, home to about 4000 people and the Territory's fourth-largest settlement, according to modelling seen by The Australian, and could strip $400 million annually from the Top End economy.

Preparing to depart for Canberra and Europe in a last-ditch attempt to save the plant, NT ChiefMinister Terry Mills said the numbers had given Rio a "strong signal".

However, he maintained it was not curtains for Gove. "My sense is that they actually want to keep the refinery going," he said. "The aluminium market is down, but that's not always going to be the case. Having gas, cheaper energy, for an operation that's improving its balance sheet puts them in a stronger position."

Rio wants the NT government to give up about 10 years' worth of gas to power the plant -- which it plans to sell -- but the move could expose Top End taxpayers to a billion-dollar liability.

It is understood the federal government has also been approached to underwrite up to $1 billion in infrastructure costs involved in getting the gas to Gove.

Mr Mills will meet federal Minister for Energy and Resources Martin Ferguson, Tony Abbott and opposition energy spokesman Ian Macfarlane before heading to Europe. He will seek commitments from the federal government and other premiers to work towards connecting Australia's pipelines, to reduce the cost of developing gas resources.

The move could mitigate the Territory's risk associated with giving up gas for Gove, and better position it to take advantage of an expanded domestic gas market.

Mr Mills yesterday ramped up pressure on Rio, saying the company had "worked reasonably hard" to solve the problem on its own, but needed to do more. "Rio need to respond. They have obligations and those obligations need to be honoured," he said.

He said Italian gas supplier ENI, which stands to profit from any deal, needed to be more flexible, reiterating threats to introduce a gas reserve policy.

"We can't just have the international markets making use of an asset that we have and then we're left in a weaker position," he said.

Rio subsidiary and the plant's operator, Pacific Aluminium, recently signed a 40-year commitment to provide basic services to Nhulunbuy. A spokesman for Pacific Aluminium said Rio had not yet issued a final decision.

A decision is expected by the middle of the month.