Australia's largest aluminium smelter is consulting with employees about the future of its operations as it struggles with rising energy costs.

In a statement released this morning Tomago Aluminium said it was yet to identify a pathway that supported commercially viable operations beyond the expiration of its energy contract in 2028.

The smelter, located north of Newcastle, employs more than 1,000 people and produces almost 40 per cent of Australia's annual aluminium output.

The company said finding competitively priced energy remained a "central challenge".

Tomago Aluminium is the country's largest single user of electricity and its energy costs account for more than 40 per cent of its operating costs.

The company said the increased cost of coal-fired and renewable energy options fro

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