Earlier this week Rio indicated it would start to wind down operations at the plant after talks between the company and the Australian and Northern Territory governments failed to secure a gas supply for the project.

Rio previously said converting the plant's power supply to natural gas was vital to securing its viability.

The refinery's closure is expected to have a significant impact on the local economy. It's understood the plant's workforce numbers over 1000 employees and contractors, and combined with the bauxite operation the project is the largest private employer in the NT.

Negotiations on the move have been underway for many months.

The company said it would be working with employees and the community to develop a timeline for the plant's closure and there would be no immediate change to refinery operations.

It said the process of suspending production was likely to start in the first quarter of 2014 and be phased throughout the year.

"This is a very sad day for everyone associated with Gove," Rio Tinto CEO Sam Walsh said.

"It has been an extremely difficult decision and we recognise it will have a significant impact on our employees, the local community and the Northern Territory.

"There is no doubt it is a challenging path ahead.

"We are working in partnership with the NT and Australian governments, the broader community and traditional owners to identify initiatives to create new opportunities for the people of Nhulunbuy.

"We have a firm belief in the potential of the bauxite operation, a quality asset with a long-term future."

Rio said establishing a long-term plan for the bauxite operation and its 350 employees and contractors was key to retaining a sustainable business presence in the region.

It said the federal and NT governments had worked "tirelessly" over recent months to find a future for the refinery and all practical scenarios were considered.

"I recognise the sincere goodwill and effort of all stakeholders including the NT and Australian government and the personal efforts of chief ministers and Australian government ministers, as well as traditional owners, the Northern Land Council and the local community," Walsh said.

"I would also like to acknowledge the significant business improvements our Gove employees have achieved in the face of extremely challenging market conditions over an extended period of time.

"Our aluminium business is facing challenging market conditions and tough decisions are needed but those decisions are so much harder where our employees and local communities are affected as they are in Nhulunbuy."

Rio said key factors influencing its decision to close the plant included low alumina prices, a high exchange rate and substantial after-tax losses despite considerable efforts to improve refinery performance.

Shares in Rio were last trading 2.6% higher at $A66.13.