The director of The Hobbit and a sequel, to be largely shot in Wellington, has still to work out whether it will be two self-contained movies or one continuous movie in two parts.

Mexican director Guillermo del Toro, whose new film Hellboy II: The Golden Army is No 1 at the New Zealand box office, said decisions on how the films will complement each other had still to be made.

The first film could be self-contained, covering The Hobbit in its entirety, or, some of the story could spill over into the second film which will also be based on author JRR Tolkien's other writings to create a direct link to The Lord of the Rings.

"We already started through the Internet and phone and video conferencing and all that," del Toro said. "And we had a meeting several weeks into Hellboy about the screenplay."

Del Toro, 43, is writing the script with Peter Jackson, Fran Walsh and Philippa Boyens, who co-wrote The Lord of the Rings.

He will spend three-and-a-half years in Wellington working on the films, to be shot simultaneously in 2010 and released in 2011 and 2012.

Some directors could be worried that Jackson, the producer of both films, would cast a shadow over The Hobbit, but del Toro said he expected Jackson would be a great collaborator.

"We've had a perfectly beautiful relationship so far, where we understand each other's role – I am the director and he is the producer," he said. "He's been incredibly supportive."

Rings fans are already salivating about The Hobbit, with the affable Mexican a popular choice given his skill in creating fantasy worlds.

"The more banal everyday life becomes, the more interested we become in fantasy somehow," del Toro said. "We're always gravitating to stories that present us and our lives and our problems in an almost metaphorical way on a larger scale.

"It can be Siegfried and the dragon [in an ancient German poem] or it can be Bilbo and the dragon [from The Hobbit] or it can be Hellboy against the tooth fairies and the Elemental [in Hellboy II]. But we love to extrapolate almost to a symbolic level our everyday little problems into adventures. It's part of the human endeavour." Sydney Morning Herald