For Australian Magnesium Corp's ailing Stanwell project to survive it will be "significantly reduced in scale", according to Queensland Premier Peter Beattie.
Prime Minister John Howard called the Queensland premier on Tuesday and the pair spoke at length about how to "save" the ailing $1.7 billion light metals project outside Rockhampton.
Mr Beattie told reporters that all stakeholders were doing everything they could to "try and keep the project alive ... we think we can".
"We're determined to work together but at this point we don't know the future. This project is in serious trouble and we are trying to save it," Mr Beattie said.
"There will be a significant reduction in scale."
But parliamentary secretary to the Finance Minister Peter Slipper said the Australian Magnesium Corp's Stanwell project had been saved.
"Why is it saved? Because the commonwealth and the state government and other stakeholders have sat down and talked, worked out how important this is to Queensland and we've come up with a solution which will benefit central Queensland, benefit our economy and give people the opportunity of a foot on the employment ladder," Mr Slipper told ABC Radio.
The federal government has thrown its support behind a proposal to restructure the $1.7 billion Stanwell magnesium project.
But finance minister Nick Minchin has ruled out any further federal funding to help save the partly built plant at Stanwell, near Rockhampton.
The conditional backing followed a proposal from the Queensland government to scale down the endangered Australian Magnesium Corporation (AMC) project to ensure its survival.
"The commonwealth government is committed to doing all that it can to see this plant proceed," Mr Minchin said in a statement on Wednesday.
"We have previously provided a $50 million loan to AMC through CSIRO and provided a $100 million guarantee facility.
"This restructure would not involve the commonwealth contributing any more funding to the project."
Queensland premier Peter Beattie said earlier a scaled down version of the project could be viable, but he also ruled out additional funding.
"It's a project worth fighting for but it will be in a very significantly modified form if it goes ahead," he told reporters.
