Fort Rupert until August 24, 1852 when Governor Douglas instructed them to move on to Nanaimo where a coal seam had been discovered. Work proceeded but living conditions were difficult. In 1854 when the term of their HBC contracts came up and Governor Douglas refused to increase their pay rates, Gilmour left to return to Scotland. Dunsmuir stayed on. He went on to propose to Douglas that he carry on personally with the operation of a seam that Gilmour had thought was played out. On October 12, 1855, Dunsmuir commenced work on his own account and within a month was producing seven tons of coal a day. This venture was a modest success, but as the seam ran out, Dunsmuir was again employed to operate a new pit that the HBC opened in 1860. Coal The lease from the crown that gave the HBC the rights to all of the coal found on Vancouver Island ran out in 1859, requiring the company to purchase the that made up its Nanaimo operation. With the new pit operational, the HBC sold its entire Nanaimo operation to the Vancouver Coal Mining and Land Company in September 1862 for $200,000. Dunsmuir worked from time to time as Superintendent of that company and, as well, for the Harewood Coal Company of his friend Dr Alfred Benson, which failed to raise the capital it needed to exploit its claim. Once the crown lease the HBC held expired in 1859, it had become possible for claims to be staked by others. In October 1869 Dunsmuir was fishing for trout at Diver Lake, a few miles north and west of Nanaimo, when he found a coal outcrop. He staked a claim to in a band wide and long including the north half of Diver Lake and running right to Departure Bay in the area known as Wellington. In order to stake a claim of this size, he was required to form a company, to be known as Dunsmuir, Diggle & Company. His sons James and Alexander and some others were partners but signed off once the legal requirement of partners in the venture had been met. Wadham Diggle, commander of the naval vessel Boxer, one of the first to use Dunsmuir's coal, invested $8,000 in the venture. Rear Admiral Arthur Farquhar, Commander in Chief of the Pacific Fleet invested a further $12,000. The two investors left the operation