Rio Tinto - the ultimate owner of the Tiwai Point aluminium smelter - says it will suspend aluminium production at its plant in Gove, in Australia's Northern Territory.

The move confirms speculation of a plant shut-down in the Australian media last week.

Rio said it would focus on its bauxite operations after deciding that the Gove refinery was no longer viable.

Rio chief executive Sam Walsh said the Australian and Northern Territory Governments had worked with Rio over recent months to try to secure a long-term future for the refinery.


But he said Rio's aluminium business was facing challenging market conditions "and tough decisions are needed".

Key factors behind the decision were continuing low prices, a high Australian dollar, and substantial after-tax losses for the refinery, despite considerable efforts to improve the refinery's performance.

Gove is the largest private employer in the Territory with a workforce of 1500.

The Tiwai Point smelter is 79.36 per cent owned by the Rio subsidiary Pacific Aluminium and 20.64 per cent by Japan's Sumitomo Chemical.

Earlier this year, Meridian and Rio reached an agreement on the supply of power to the smelter.