Australians to fork out $2.5 billion to bail out Rio Tinto-owned smelter

Australian taxpayers will fork out a $2.5 billion bailout for Rio Tinto to keep the country’s largest aluminium smelter open and 1000 jobs afloat.

The resource giant warned rising power prices could force the Tomago Aluminium in Newcastle to close at the end of its existing electricity supply contract on December 31, 2028.

It comes as the cost of coal-fired and renewable energy options is expected to increase from January 2029, based on current market proposals.

Tomago Aluminium is the single largest user of electricity in the country, consuming more than 10 per cent of the NSW’s power supply.

Prime Minister Anthony Albanese and NSW Premier Chris Minns announced the state and federal governments would pay an equal half of the bailout on Thursday.

“There is no question that aluminium is such an essential product to be produced because it goes into everything else that is manufactured in this country, just about, and that is why we simply weren’t prepared to sit back,” Albanese said.

“If we’re going to be a country that says with a straight face that we will continue to build things in Australia, we could not turn our back on Tomago,” Minns said.

Tomago is the region’s largest employer with the bailout is estimated to help save 5000 indirect jobs in the broader economy.

“Would Australia be better off or worse off if these jobs went to Korea, China or India?” Minns said.

“The answer is we would be worse off.”

Tomago Aluminium has agreed to invest an additional $1.1 billion to reduce its energy usage and transition to more renewable energy.

It is expected to accelerate the decarbonisation of more than 10 per cent of the state’s electricity grid.

Opposition Leader Angus Taylor said the bailout was an “admission of failure on energy policy in this country”.

“The reason they are having to do this is because electricity prices are too high,” he told reporters.

“Australians are paying the price, and the only way to keep manufacturing in this country is through government subsidies.”

The Tomago smelter deal is the latest taxpayer-funded rescue package for the country’s struggling metals processors in the last two years.

The Albanese government has also contributed to packages worth $2 billion for Rio Tinto’s Boyne smelter in Queensland, $2.4 billion for the collapsed Whyalla steelworks in South Australia, and $600 million for Glencore’s copper smelter and refinery in Mt Isa.

Tomago Aluminium produces 590,000 tonnes of aluminium every year, which is Australia’s fifth-largest export commodity.

Aluminium is used in the production of cars, planes, homes, sporting equipment and drink cans.