Evans Harch Pty Ltd signed the tender agreement in January and will begin construction in February with work expected to be completed on the facility by the end of 2012.

The ten-bed aged care facility, announced on Friday, is part of the State Government's $7 billion commitment to Australia's largest health infrastructure building program.

"This is a great outcome for Cloncurry," Member for Mount Isa Betty Kiernan said.

"This is great news for the senior residents of Cloncurry as we are all aware of the difficulties facing our elderly residents, especially those who require residential care and who wish to remain in the community, close to family and friends."

The old administration and outpatients building at the Cloncurry Hospital will be demolished to make way for the new, aged care annexe, car park and hospital entrance.

"Early works will deliver alternative accommodation for pharmacy, x-ray and administration, which will be moved from the old administration/outpatients building,'' Mrs Kiernan said.

"Pharmacy and x-ray will relocate to the former operating theatre and the administration section will relocate to a new building which is being provided and paid for by the Cloncurry Shire Council on vacant land at the front of the hospital."

Evans Harch has worked on the redevelopment of Rockhampton, Palm Island, Emerald and Clermont hospitals.