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"The Hobbit" is not going anywhere. After the Unions boycott which was then followed by Warner Bros' threat to move the production offshore, the production of the movie will take place in New Zealand as planned since the beginning. The latest deal is reached after high-level local government officials and co-producer/distributor Warner Bros had face-to-face negotiations, local broadcast outlet TVNZ reports.

"I'm delighted we have achieved this result," New Zealand prime minister John Key states on Wednesday, October 27 during a news conference in Wellington. "Making the two movies here will not only safeguard work for thousands of New Zealanders, but will also allow us to follow the success of the Lord of the Rings trilogy in once again promoting New Zealand on the world stage."

As part of the deal, Key says the government will introduce new legislation on Thursday to clarify the difference between an employee and a contractor, adding that the change would affect only the film industry. Moreover, the country would offset $10 million of Warner's marketing costs as the government agreed to a joint venture with the studio to promote New Zealand "on the world stage," New York Times reports. "The impact of this will mean an additional rebate for 'The Hobbit' movies of up to $7.5 million per picture, subject to the success of the movie," Key further reveals.

Two parts of "The Hobbit" will be shot back to back in 3-D starting February 2011. Peter Jackson has signed up to direct while a number of actors have been cast with Martin Freeman taking the lead role of Bilbo Baggins. The first movie is due December 2012 and "The Hobbit 2" is expected to come out a year later.