The Canadian nickel company Falconbridge says it can't go ahead with a processing plant in northern New Caledonia under conditions set by France.
The French ministers of finance and overseas territories had promised millions of dollars to underwrite the project.
Falconbridge's vice president, Denis Couture, says the company has written to the French government overnight, to decline its proposed financial support.
The US$2.2 billion project has been in the pipeline for seven years and France touted it as way to develop the mainly Kanak north of the territory.
The Bercy agreement signed in 1998 states that Falconbridge, the local government and a French state-owned nickel company, had to make a decision by the December 31st on whether to go ahead with the construction.