Rio Tinto (ASX:RIO) has received a $2.5 billion bailout from the Australian Government and the Government of New South Wales to keep Australia’s biggest aluminium smelter operating.
Rio says the agreement will provide long-term stability for the smelter, its workforce, customers, and surrounding community by providing reliable power until 2038.
Under the terms of the agreement, Tomago Aluminium will enter a 10-year power purchase agreement for electricity supply to the smelter, with all power supplied from 2033. The new agreement will begin following the expiry of the current electricity contract on 31 December 2028.
Tomago Aluminium is an independently managed joint venture owned by Rio Tinto (51.55%), Gove Aluminium Finance (36.05%), and Norsk Hydro (OSL:NHY) (12.4%).
Alongside the new agreement, Tomago Aluminium will invest $1.1 billion in the smelter between now and 2038, including $100 million for decarbonisation initiatives.
Rio Tinto Aluminium & Lithium Chief Executive Jérôme Pécresse says the agreement secures the smelter’s long-term future.
“I want to recognise the significant work of the Commonwealth and New South Wales Governments, unions and the Tomago workforce, as well as the many people across Tomago Aluminium, Rio Tinto, and our joint venture partners who helped reach this outcome,” Pécresse says.
“It means Australia keeps a critical piece of sovereign manufacturing capability, while helping Tomago Aluminium continue competitively producing the aluminium needed for the global energy transition.”
Bailout echoes Boyne smelter deal
The agreement follows a March 2026 deal between Rio, the federal government, and the Queensland Government that secured the long-term future of the company’s Boyne aluminium smelter in Gladstone.
In late 2025, Rio flagged the rising costs of both renewable and coal-fired power as a risk to Tomago’s future. In December 2025, Rio and the federal and New South Wales governments announced a plan to address the smelter’s energy challenges following the expiry of its current contract.
Tomago is Australia’s largest aluminium smelter, producing up to 590,000 tonnes of aluminium annually, equating to almost 40% of Australia’s annual production. The smelter directly employs around 1,000, and supports an additional estimated 5,000 indirect jobs.
The Government of New South Wales and federal governments released a joint statement on the agreement, stressing its importance to the smelter and surrounding communities.
“The joint investment will deliver a long-term renewable energy solution for the Tomago Aluminium smelter that supports commercially sustainable operations beyond 2028 and accelerates decarbonisation of more than 10 percent of NSW’s electricity grid, supporting and securing the future of one of the state’s most important industrial assets.
“The joint investment will underpin nearly three gigawatts of new renewable generation and firming capacity, strengthening the state’s electricity system and supporting long-term energy affordability and reliability for New South Wales.”
The Government of NSW also highlighted the significance of the smelter and Australia’s role as one of few countries with a complete end-to-end aluminium supply chain spanning bauxite mining, alumina refining, aluminium smelting, and advanced manufacturing.
“The arrangements also ensure revenue comes back to the federal government when aluminium prices are high,” the release from the NSW Government says.
“This means all Australians will benefit from maintaining domestic aluminium capability and sovereignty, with the added benefit of a monetary return on investment from our governments’ contributions should aluminium prices rise.”
Rio Tinto’s Bell Bay aluminium smelter is also at risk, as previously reported, as the company continues negotiations for a new 10-year electricity agreement with Hydro Tasmania.
Write to Amy Rotman at Mining.com.au
Images: Rio Tinto
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