The new hospital will have 30 beds

Work is expected to start on the hospital near Porthmadog in August 2004 and it is due to open two years later.

It will serve the people of east Dwyfor and north Meirionnydd, and will replace the Bron y Garth hospital in Penrhyndeudraeth.

The Welsh Assembly Government has approved an outline business case that will enable the North West Wales NHS Trust to purchase land in Tremadog.

The trust has already had outline planning permission granted for the site, which adjoins Ysgol y Gorlan primary school.

There had initially been fears about the dangers of locating the new hospital near a rock face, but these were discounted by a geological survey.

This is a dream come true, for the area is in real need of a new hospital Cllr Gwynfor Hughes

Originally, the development was to be financed through a PFI project (Private Finance Initiative), but the assembly has said it will fund the entire cost of more than �10m with public money.

The news has been welcomed by health watchdog North Gwynedd Community Health Council.

"This is excellent news for the entire area and should serve to silence those who have been trying their best to prevent the hospital being built at Tremadog," said Cllr Selwyn Griffiths, secretary of the Madog Hospital Action Committee.

The committee was set up to campaign for a new hospital when the old Madog Memorial Hospital was closed more than 10 years ago.

"At last, this is a dream come true for the area is in real need of a new hospital," added the committee chairman Cllr Gwynfor Hughes.

Both the North Wales Health Authority and the Gwynedd Local Health Group have backed the proposed hospital.

The hospital will have 30 care of the elderly and GP medical beds, plus a wide range of supporting services, including an outpatient department.