A BID for £10.5 million of lottery cash to help pay for the revamp of Derby's historic Silk Mill has failed.
But Derby Museums Trust, which runs the attraction, says Heritage Lottery fund bosses have encouraged a new bid which will be made later this year.
Tony Butler, the trust's executive director, said the rejection was down to their being "insufficient funds to fund all projects that made applications".
He said: "In the 2014 round of funding for Major Grants National Heritage Memorial Fund Board, Heritage Lottery Fund's parent body, have not awarded funding to Derby Museums to redevelop the Silk Mill.
"Whilst we are clearly disappointed with the outcome, we have received positive feedback about our bid and have been encouraged to reapply.
"The Board recognised the strength and vitality of the project, including the heritage story, the links to wider regeneration and the exciting and innovative museum maker.
"We will be reviewing our bid with feedback from the Heritage Lottery Fund and reapplying later this year."
