Brazil's Companhia Vale do Rio Doce, or CVRD, has approved $3-point-2 billion US dollars for the Goro Nickel project in New Caledonia.
The move by the world's largest producer of iron ore and nickel comes after years of delays, cost blowouts and disputes with locals.
Goro has been one of the most-watched nickel developments in the world amid speculation CVRD could cancel it and place further pressure on the already tight nickel market, after it reassessed the project that it gained through its purchase of Canada's Inco last year.
The nickel price has reached record highs of more than $50,000 US dollars a tonne this year amid increased demand for the stainless steel ingredient.
But the cost of building large projects needed to make a dent in the global nickel supply has also increased.
The chief executive of CVRD Roger Agnelli told Brazilian media that customers have been asking for more product so they have brought these demands home.
CVRD says it expects Goro will produce its first nickel by the end of next year or early 2009, with production eventually ramping up to 60,000 tonnes a year.