PARIS - France has agreed to provide a €140-million loan to Prony Resources to avert the collapse of the New Caledonian nickel producer as Paris pursues negotiations to salvage the Pacific territory's loss-making nickel industry.

Prony Resources is one of three nickel processors in the French territory of New Caledonia that face insolvency as high costs and political tensions have hit profitability while rising Indonesian supply has dented international prices.

The French government has approved the loan in addition to €40-million in annual energy subsidies for Prony proposed in a wider package for the industry that Paris aims to sign off this month, Sonia Backes, president of New Caledonia's southern province, said on Thursday.

"This loan will give us time to find a buyer," Backes told local broadcaster La 1ere Nouvelle Caledonie, adding the funds should allow Prony Resources to continue operating until 2026.

France's finance ministry confirmed the proposed loan for Prony but said it was subject to an overall agreement being reached on the New Caledonian industry.

The southern province where Prony's operations are based is one of several shareholders in the company, including commodity merchant Trafigura, which has a 19% stake.

Rothschild & Co has been mandated to find a new investor for Prony, Backes also said.

A spokesperson for Rothschild did not immediately respond to a request for comment.

Prony Resources also did not respond to a request for comment.

Paris had offered similar aid to Koniambo Nickel SAS (KNS) but its co-owner Glencore said the support was insufficient, announcing this week it was halting output at KNS' processing plant for six months while it sought a buyer for its stake.

New Caledonia's third nickel processor is SLN, in which French miner Eramet has a majority stake. Eramet has said it will not provide further funding to cover losses at the business.