The chairman of the judges, Richard Sykes, presenting the award, described the Big Pit in Blaenafon as 'an exceptional emotional and intellectual experience', which 'tells the individual stories of its community better than any museum I have visited'.

The museum's spokeswoman, Kathryn Stowers, told Museums Journal that 6,800 people visited the Big Pit in the week following the award - 60 per cent up on the same week in 2004 - and that the attraction had garnered media coverage as far afield as the US and Canada.

She said the personal experiences recounted by the former miners taking visitors down the pit set the museum apart from its strong competitors in a shortlist made up entirely of museums with an industrial theme.

'We are not just telling the stories of industry; we are telling the stories of industrial communities,' she said. 'People relate to us because we represent the culture of the surrounding area of the Valleys. An award like this has helped people take pride in their own culture and heritage.'

She said the Big Pit would use the prize money to build a 'major new education facility' to provide a special space for the hordes of school visitors, who account for some 40 per cent of the Big Pit's 141,000 visitors.

Paul Green, the deputy manager, was a miner for 21 years and now supervises the 17 pit guides who give 50-minute tours down the 300-foot shaft. He said: 'We're all ex-miners - we tell visitors the facts about the mine but also give our own interpretation, passing on our knowledge and experience to the general public. It's more personalised.'

The mine, which produced 100,000 tonnes of coal a year before it was closed, first opened as a museum in 1983 but many parts of the site were not accessible to the public because of a lack of funding.

It closed for work in 2001 and reopened in 2004 after a £7m makeover which gave the public access to all the colliery buildings, including the miners' baths at the pithead, which house the main exhibition, the winding engine house, and the blacksmith's workshop.

The Gulbenkian - the biggest arts prize in the country - aims to promote awareness of museums by rewarding 'imagination, innovation and excellence' in a British museum of any size.

Alun Pugh, the Welsh Assembly culture minister and the son of a coalminer, said the 'knowledge and dedication of the staff' made the Big Pit 'a world-class attraction'.

The other finalists were: the Coventry Transport Museum; Time and Tide: the Museum of Great Yarmouth Life, which explores the community of the herring curing industry; and Locomotion: the National Railway Museum at Shildon in County Durham, which has just undergone an £11m makeover.

Michael Day, the chief executive of Historic Royal Palaces who was one of the judges, said all of the ten museums on the shortlist offered examples of good practice.

'There is a huge amount of really interesting work happening across the country, even in really unlikely places.' He cited the Taigh Chearsabhagh Museum and Art Gallery on the island of North Uist in the Hebrides as 'a fantastic example of how the boundaries between a museum, gallery and culture are absolutely broken down'.

He also praised the partnership with local authorities on projects such as the Shildon museum, and the 'genuine community consultation' that had informed the content of the Great Yarmouth museum.

Roland Lloyd Parry