Finance Minister Grant Robertson says the announcement Tiwai Point's aluminium smelter near Bluff will close is "a real blow" for the Southland region.
Multinational mining giant Rio Tinto announced on Thursday morning the smelter - Southland's biggest employer - would close next year due to the business being "no longer viable".
"It is not a decision we have made lightly and without significant careful consideration," Rio Tinto chief executive Alf Barrios said in a statement.
Robertson said the smelter has been significant for Southland's economy.
"This will be a real blow for the people of Southland," Robertson told Magic Talk's Peter Williams on Thursday. "Anyone who's spent time down there or knows people down in the Southland area knows Tiwai and the smelter have been a big part of the economy - employing a significant number of people."
That number of people is about 1000 and the smelter's closure will see those jobs go. Robertson said he didn't want to underestimate or "sugarcoat" its impact.
"It is something that will be felt deeply by the people of Southland."
Robertson acknowledged the closure had been "on the cards" for some time. The smelter's future has been hanging in the balance since Rio Tinto conducted a strategic review of it last year.
It was also bailed out by John Key's National Government six years ago to the sum of $30 million. Robertson highlighted comments by Key's Government at the time that there would be no more money after that.
"They've [Rio Tinto] known that," Robertson said. "There's been a few conversations going on the but the aluminium prices in the world have been going down - a number of sectors are moving away from aluminium.
"We're going to be there - to support the people of Southland citizens and provide other economic opportunities for jobs," said Robertson.
National Party MP Sarah Dowie said the closure was "devastating" for the region.
She said the Government needed to "step up" concerning future opportunities for Southland.
"My thoughts are with those whose livelihoods will be affected as the smelter supports 1000 jobs and 1600 indirect jobs," the Invercargill MP wrote on Facebook.
Robertson said it was "early days" in terms of the closure announcement.
"We've got to recognise the impact that this has on people and their livelihoods and jobs," he told Williams.
Energy Minister Megan Woods said Rio Tinto's decision was disappointing in favour of "keeping open coal plants".
She said, however, the closure will free up about 13 percent of New Zealand's power supply which will relieve some pressure and have a positive impact on prices.
"I also want to make clear that the Government expects Rio Tinto will meet their obligations for clean-up of the site and do the right thing on the dross," Woods said, adding the clean-up cost was about $256 million.
Robertson suggests other opportunities will arise in the Southland region.
"We will support a just transition to more job opportunities," he said.