About 1,100 jobs will be lost when the global miner Rio Tinto shuts its Gove alumina refinery in the Northern Territory next year.

The company has announced it will start phasing out alumina production at the site in the first three months of next year, leaving about a quarter of the population of nearby Nhulunbuy out of work.

Rio says it will continue its producing bauxite from the mine at the site.

The decision comes after the company abandoned plans to convert its refinery to gas power and announced it was reviewing future operations.

In a statement released to the share market, Rio Tinto chief executive Sam Walsh said it was a "sad day for everyone associated with Gove."

"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," he said.

"There is no doubt it is a challenging path ahead. We are working in partnership with the Northern Territory and Australian Governments, the broader community and Traditional Owners to identify initiatives to create new opportunities for the people of Nhulunbuy."

Space to play or pause, M to mute, left and right arrows to seek, up and down arrows for volume. Listen Duration: 4 minutes 4 seconds 4 m 4 s Work at Rio's Gove refinery suspended ( Martin Cuddihy ) Download 1.9 MB

Northern Territory Chief Minister Adam Giles is travelling to Nhulunbuy, where a community meeting has been held.

Prime Minister Tony Abbott says Rio Tinto has a moral and legal obligation to offer to support to the town.

"The people who I feel very sorry for are those who have bought homes and businesses in Gove on the expectation of a very vibrant, ongoing continuing economy, and who are now in a very difficult position," he said.

"I think these are the people who Rio does have a moral debt to if not necessarily a legal debt."

Key points: Rio Tinto to suspend alumina production next year.

Rio Tinto to suspend alumina production next year. Bauxite production to continue.

Bauxite production to continue. Most of Nhulunbuy's population of 4,000 work at Gove, or for other companies linked to the plant.

Most of Nhulunbuy's population of 4,000 work at Gove, or for other companies linked to the plant. Announcement comes after company scrapped plans to shift to gas power.

Announcement comes after company scrapped plans to shift to gas power. Rio Tinto says low alumina prices and high dollar behind decision.

The Deputy Prime Minister Warren Truss says the government will do what it can to reduce the economic impact of the refinery closure.

But he warns it will be difficult to fill the gap left by such a large employer.

"It will be very difficult for Commonwealth or State governments to replace a 1,000 jobs any time quickly," he said.

"There will be an adverse community impact and I regret that. The company and respective governments have been talking about the way forward.

"Those discussions have been constructive but sadly they haven't been fruitful in the end."

Low alumina prices and high dollar behind decision

Rio Tinto's statement says production will continue at the plant until early next year.

"Key factors influencing the decision were continuing low alumina prices, a high exchange rate and substantial after-tax losses for the refinery despite considerable efforts to improve refinery performance during that time," the statement said.

Sorry, this video has expired Nhulunbuy locals angry over Rio Tinto Gove refinery closure

"A priority will be establishing long-term certainty for the bauxite operation and its 350 employees and contractors."

Rio Tinto says all "practical scenarios" were considered for continuing alumina production.

"There is nothing more the Northern Territory Government could have done to help secure a long-term future for the refinery."

Rio Tinto's share price have climbed ahead after the announcement.

At 10:30am (AEDT), it was trading 2.7 per cent higher at $66.12.