Finance Minister Grant Robertson says the closure of the Tiwai Aluminium Smelter will be a blow to Southlanders.
In a statement to the Australian Stock Exchange this morning, Rio Tinto made the announcement, saying its strategic review had "shown the business is no longer viable given high energy costs and a challenging outlook for the aluminium industry."
The company has given Meridian Energy notice to terminate its power contract, which ends in August next year. It expects the wind-down of operations will be done by then.
The Minister of Finance said there could be more done to extract value from the agricultural, aquaculture and manufacturing sectors in the region.
"Tiwai Point has been very much a part of the Southland economy for many years and provides many jobs both directly at the smelter and indirectly in the wider economy," Robertson said.
"The message I have for the people of Southland today is the government stands alongside you and with you to start providing new job opportunities in the region.
"This is a very sad day for Southland but there are also opportunities attached to this."
He said there was an inevitability about today's announcement from Rio Tinto.
"It is now our job to work with the people of Southland to find new opportunities to assist in a just transition for them, and that is the committment we are making today."
Minister of Energy and Resources Megan Woods said the Manapōuri Power Station, which supplies power to the smelter, could be hooked up to the grid to supply energy to the North Island and that work could be bought found under the changes to the Resource Management Act.
"We've had a number of people approaching us about alternative uses for that very large amount of generation," Woods said.
The union representing workers at the smelter says about 1000 people directly employed by the smelter would be affected, but the decision would also impact on a further estimated 1600 workers in the supply chains.
E tū union said staff were shocked and dismayed and never thought threats to close the plant would ever eventuate.
Negotiator specialist Joe Gallagher said it was not too late to get back around the table, strike a deal, and save jobs.
"This is a significant employer and this company is at the heart of its community. A closure will affect the entire supply chain, including other local suppliers," Gallagher said.
"The smelter produces high grade aluminium and quality jobs for New Zealanders. It doesn't make sense that as soon as it can't get energy any cheaper, it abdicates responsibility for its workers."
Gallagher said government should consider a similar approach to that used in Taranaki with the Taranaki 2050 Roadmap.