The company says it has started a 90-day consultation with staff and union representatives, and is also in discussions regarding the possible sale of the power station at the site.
The Lynemouth smelter in Northumberland opened in 1972. It employs 515 people, with an additional 111 employed at the power station.
Jacynthe Côté, chief executive of Rio Tinto Alcan, said: ‘This decision follows a thorough strategic review that explored every possible option for continuing to operate the smelter and power station.
‘However, it is clear that the smelter is no longer a sustainable business because its energy costs are increasing significantly, due largely to emerging legislation.’
Dr Neil Bentley, Confederation of British Industry (CBI) deputy director-general, said: ‘This news shows why the government must act to insulate manufacturers most at risk from the increasing cost of energy legislation.
‘Energy-intensive companies make the very products the UK needs to move to a low-carbon economy and are already being hit by rising energy prices and slower demand.
‘The CBI proposes targeting companies most at risk with an exemption from the carbon floor price.’
Rio Tinto Alcan said in a statement that affected employees will receive support, including re-training and job-search assistance.
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