Rio Tinto announced on Wednesday that it plans to shut its subsidiary, New Zealand Aluminum Smelters (NZAS) by August 2021.
Rio Tinto said in a press release that it found NZAS made a net loss of NZ$46mn ($30mn) in 2019 during its strategic review. Moreover, the company noted that the smelter is not economically viable due to the high cost of energy in the region, especially when paired with the challenging outlook of demand for aluminum.
The company has served notice to Meridian Energy, to terminate the power contract which ends in August next year, which is when NZAS is expected to wind up its operations.
Alf Barrios, chief executive, aluminum at Rio Tinto said that the move was made after the company exhausted all its strategies to secure a reduction in power costs.
He further added that Rio Tinto will do all it can to help the 1,000 displaced workers and the Southland community.
NZAS is a joint venture between Rio Tinto and Sumitomo Chemical where the former holds an 80pc stake and the latter a 20pc stake in the company.