New Caledonia on Friday cancelled a deal with Brazilian mining giant Vale and France's Eramet to allow the exploration of one of the last major untapped nickel deposits in the world.
President of the southern province, Philippe Michel, said the agreement signed in April was illegal on five different counts, "each of which is enough to cancel the allocation of the resources".
New Caledonia, off northeastern Australia, has a quarter of the world's deposits of nickel, a key ingredient for manufacturing stainless steel.
The French overseas territory has been reviewing its mineral laws after a change of leadership and a surge in nickel prices, which have jumped a third this year after top miner Indonesia banned ore exports.
New Caledonia President Cynthia Ligeard told AFP that she "did not want to react at the moment" on the decision. Eramet also declined to comment.
The government estimates the Pernod and Prony deposits in question are estimated to hold between four million and seven million tonnes, but Michel said the amount had been understated in the deal with the miners.
Eramet and Vale have not yet made any investments in the project, which could take 15 to 20 years to start production, according to a source familiar with the matter.
Societe Le Nickel (SLN), a subsidiary of Eramet in which the state owns a 26-percent stake, operates five nickel mine sites and employs 2,200 people in New Caledonia.