At Joadja Creek, a valley some 16 miles west of Mittagong, the mining of oil-shale seams commenced in the 1870s. The shale was valuable as a source of kerosene.
Edward Carter, John de Villiers Lamb and other leaseholders extracted the oil-shale. Early output amounted to about 200 tons per month. Coal seams were also mined.
Steep rail inclines were built to mines up on the cliff-face. Pit ponies pulled skips along a rail network connecting the mines, inclines and processing areas in the valley. Bullocks hauled the shale to a depot on the plateau where it was loaded into wagons and taken by horse teams to Mittagong railway yard.
The principal market at the time was the Australian Gas-light Company in Sydney which used 30 to 50 tonnes of untreated shale a week to enhance the quality of its gas. The ore was also exported to America, England and Melbourne.
With the advice of a leading Scottish oil-shale engineer, the decision was made in 1877 to expand the venture at Joadja. Lamb, who controlled all the significant shale bearing land north of the creek not in Carter's hands, formed a syndicate. It was decided to build large banks of distilling retorts and a refinery at the Joadja works. The shale would be processed on site and refined products sold in Sydney and elsewhere. A large number of workers would be required.
In 1878 the syndicate of lease owners registered the Australian Kerosene Oil & Mineral Company (AKO) with a nominal capital at inception of £50,000. Over the next three years AKO systematically bought up all the mining conditional purchases and leases held by others, including Edward Carter. For him it had been no more than an uncharacteristic episode in the life of a successful grazier.
AKO was then sole operator of the works. Around the valley floor it built 32 distilling retorts grouped in two benches, a refinery and numerous treatment works linked to mines on the cliff-face by a network of rails. The Company began to output bulk kerosene and lubricating oils as well as candles, soaps and waxes made from paraffin, a residue of the processed shale.
AKO applied to the NSW Government in 1879 for an extension of the State standard gauge railway from Mittagong to link with its Joadja depot.
As railway historians G H Eardley and E Stephens explain in their book The Shale Railways of NSW the Government refused to entertain the proposition. AKO then sought approval to build a private, narrow gauge (3ft 6in) railway from the Joadja plateau to Mittagong.
Permission was given, but at first without the necessary right-of-way through private lands at the Mittagong end of the projected route. Consequently AKO had to erect a depot at Mandemar, a straggling settlement in the vicinity of Wombeyan Caves Road, some seven miles west of Mittagong, where goods had to be transferred to road wagons for conveyance to Mittagong.
The railway from Joadja to Mandemar was laid across the land in a very basic and primitive fashion. The Fitz Roy Iron Works supplied the iron rails, the last produced before its closure in 1880. The first of five small-tank steam locomotives arrived from England in June 1879 to operate the line.
AKO received Government approval in March 1880 to extend its railway to a terminus on the western side of the main Southern Line, at a point half a mile south of Mittagong Station. It established a network of sidings there and built a transhipment depot with loading docks, storage sheds and loco shed.
From the Mandemar depot, the new extension crossed Wombeyan Caves Road (then just a bush track) and proceeded eastward, skirted the dam across Nattai Creek to cross the Southern Road (now Old Hume Highway). It then climbed a steep hill divide between Nattai and Gibergunyah Creeks, entered bush country to cross what is now Lyell Street, made a sweeping curve to cross Bowral Road, and sloped up to enter the companys terminal sidings. The entrance was opposite where Mittagongs Caltex service station stands today.
The Joadja Railway opened to AKOs Mittagong depot in November 1880.
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