Time Warner Inc.'s New Line Cinema settled dispute with the smash hit "Lord of the Rings" director Peter Jackson and will make two more movies with him based on the children's fantasy novel "The Hobbit," New Line said Tuesday in a statement.

"We resolved all the issues between us," said Michael Lynne, co-Chief Executive Officer of New Line in an interview. "The slate is wiped clean so we can move forward."

Metro-Goldwyn-Mayer Studios Inc. will help finance and distribute the films, New Line said. Jackson will produce the movies with screenwriter Fran Walsh.

Oscar winner Jackson sued New Line in 2005, claiming the studio miscalculated his share of receipts for the "Rings" trilogy, which came to 2.91 billion U.S. dollars worldwide.

The "Hobbit" films, scheduled for release in 2010 and 2011, are also based on the J.R.R. Tolkien books about the adventures of imaginary creatures.

They will serve as prequels to the "Lord of the Rings" trilogy, with the second film acting as a bridge to the first installment of "Lord of the Rings," Lynne said.

The movie will likely be shot in Wellington, New Zealand, he said. Starting in January, New Line will discuss with Jackson and Walsh, who are married, elements such as the movies' director and cast. He wouldn't reveal monetary terms of the collaboration.

Work on the film's script can't begin until Hollywood studios and television broadcasters reach a new agreement with striking writers represented by the Writers Guild of America, Harry Sloan, chief executive officer of Los Angeles-based MGM, said.

In the past six months, MGM helped bring New Line and Jackson together to resolve their issues and come to terms on the new agreement, Sloan said in an interview.

"The Hobbit" will be MGM's second franchise after the "James Bond" movies, Sloan said.

New Line's "The Golden Compass" opened to lower-than-expected box office sales, according to Brandon Gray, president of researcher Box Office Mojo LLC. The movie cost about 150 million dollars to make and has garnered 91.7 million in worldwide ticket sales since its Dec. 7 release.

Jackson won a best director Academy Award for "The Lord of the Rings: Return of the King," the third installment of the trilogy. "Return of the King" grossed more than 1 billion dollars, second only to "Titanic," which took in 1.13 billion.

(Xinhua via Agencies December 19, 2007)