Tiwai Point's aluminium smelter near Bluff will close next year, Rio Tinto has announced, in what will be a massive blow for the Southland region.
The smelter is Southland's biggest employer, with 1000 jobs and contractors working on site. It contributes $400 million per year to the region's economy.
In a statement, multinational mining giant Rio Tinto announced plans to start winding down the smelter's operations.
"As a result, NZAS [NZ Aluminium Smelters] has given Meridian Energy notice to terminate the power contract, which will end in August 2021, when the wind-down of operations is expected to complete."
Rio Tinto's strategic review had shown the business was no longer viable, the statement said. An international team was sent to Bluff last November to review exactly what would be involved in shutting the plant down.
"The strategic review concluded that the smelter, which has made Rio Tinto an underlying loss of NZ$46m in 2019, is not economically viable due to energy costs that are some of the highest in the industry globally, coupled with a challenging short to medium term aluminium outlook."
Closing the plant is set to send shockwaves through the Southland region. Newshub spoke to several smelter employees before New Zealand's COVID-19 lockdown, who said working under the threat of closure had been tough.
Rio Tinto said discussions had failed to secure a power contract that would enable the operation to be competitive and profitable.
"During the next 14 months, NZAS and Rio Tinto will work closely with partners as detailed planning is undertaken to wind-down operations, and eventually close the smelter."
Six years ago, John Key's National Government gave Rio Tinto a $30 million bailout but the current Government has indicated that's not on the table.
"We recognise the decision to wind-down operations at NZAS will have a significant impact on employees, the community and our customers," Rio Tinto chief executive Alf Barrios said.
"It is not a decision we have made lightly and without significant careful consideration.
"We are committed to working with our partners as we progress through detailed planning towards closure and we will do all we can together with the government to find ways to support the Southland community."