UPDATE 1-Eramet reaches agreement to continue SLN's New Caledonia operations

(Recasts story with statement on agreement)

PARIS, April 10 (Reuters) - French mining group Eramet said on Wednesday it had reached an agreement with the French government to continue its subsidiary SLN's mining operations in New Caledonia's Northern Province.

Under the agreement, Eramet could extend financial guarantees granted to SLN, the mining group said, in a move that would effectively avert the risk of a stoppage on its troubled New Caledonian nickel subsidiary's operations.

SLN has been locked in a dispute with local authorities over financial guarantees after the provincial government rejected a short extension of the guarantees, which are required to cover potential environmental restoration, Eramet earlier said in an emailed statement.

SLN has always operated with lodged financial guarantees, Eramet said, adding that the financial guarantees needed to be provided to relevant Caledonian provinces to ensure the restoration and rehabilitation of mining sites after their definitive closure.

Eramet has provided such guarantees since 2020 for SLN given that the nickel producer has been unable to do so itself, the group said.

SLN, which processes its mined nickel at a smelter in southern New Caledonia, is involved in wider discussions to salvage the loss-making nickel industry in the South Pacific territory.

The French government has been negotiating a rescue package for the industry, involving hundreds of millions of euros in loans and subsidies in return for a revamp of mining permits, exports and energy infrastructure.

But an end-March deadline set by Paris to sign off the deal was missed as New Caledonian parties continue to debate the proposals amid wider political tensions divided between pro-independence and loyalist parties. (Reporting by Gus Trompiz and Kanjyik Ghosh; Editing by Leslie Adler and Sandra Maler)