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DARWIN, Jan 18 AAP

January 18 2013, 5:38PM

Northern Territory Chief Minister Terry Mills is hoping the change of leadership at mining giant Rio Tinto will pave the way to a solution of a problem that threatens an outback town.

The NT government has been seeking to cut a deal that will appease Rio Tinto, which via its subsidiary Pacific Aluminium runs the Gove bauxite mine and alumina refinery in the Territory's east.

The once-profitable operation has been losing millions in recent years because of soft aluminium prices, the strong Australian dollar and the cost of running the refinery using diesel as fuel that must be shipped in.

The satellite community of Nhulunbuy and the bulk of its 4000 residents rely economically on the Gove operations and there have been fears the town would be devastated if the refinery closed.

Mr Mills on Friday said Rio Tinto, under the guidance of outgoing chief executive Tom Albanese, had been unreasonable in its demand that an agreement to pipe cheap gas to Gove be organised by January 31.

He was unsure how incoming chief executive Sam Walsh would handle the issue but Mr Mills was hopeful the new boss would be more flexible.

"I do understand that he is supportive of the plant," Mr Mills said.

Pacific Aluminium has indicated the refinery must switch to gas for power generation to survive.

It has called on the NT and federal governments to help secure a gas supply for the plant and to underwrite the $900 million pipeline.

Under the plan Pacific Aluminium would ultimately pay for the pipeline via a transportation tariff.

But allocating the gas for the plant is contentious, with fears the 600 petajoules (PJ) of gas required during the next 20 years could leave the Territory without enough gas for its own needs.

Independent MP Gerry Wood questioned whether the government should spend millions to help Rio Tinto, a multi-billion global company.

"I think there are lots of questions that need to be asked before governments start subsidising a big multi-national company," Mr Wood said.

"If a miner can't pay its way ... then really it hasn't got a future," he said.

By Xavier La Canna