Mining major Rio Tinto is planning to halt alumina production at its Gove refinery in Australia in the first quarter of 2014.

Rio Tinto, which will continue the phase-out during the year, will consult with employees and the community in the coming weeks to develop detailed plans regarding the timing and phases for closing the refinery.

Low alumina prices, a high exchange rate and substantial after-tax losses were factors which led the company to suspend production at the facility.

Rio Tinto said both the Australian and Northern Territory Governments could not find a sustainable solution to secure a long-term future for the refinery.

The company said it will now focus on its bauxite operations after finding that the Gove refinery is no longer a viable business in the current market environment.

Rio Tinto chief executive Sam Walsh said it was a difficult decision and the company recognises it will have a significant impact on its employees, the local community and the Northern Territory.

"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," Walsh added.

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

The decision comes a day after Rio Tinto unveiled plans to increase its iron ore capacity towards 360 million tonnes by 2017.