C—No. 4a,

character to leave a satisfactory dividend after paying such an exorbitant tax for water ; and that it really was so is evident from the fact that many diggers, after defraying every expense, amassed large sums of money. After the completion of the second large water race the Mountain Eace Company lowered the price of water to between six and eight pounds (£6 and £8) per week per head, but as the additional supply was attended by a more than counterbalancing discovery of payable sluicing ground, the holders of water-rights saw that the amount of payable auriferous ground was of such extent that the mining population would be, for a great length of time, proportionate to the quantity of water which they could supply. The whole amount of water conducted m the two main rages referred to I did not iirtd at any time to exceed sixteen (16) sluice heads, and as the supply of the minor races would, in my opinion, be over-estimated at two and a half (2 j) sluice heads, a fair idea of the value of the Dunstau Creek ground may be arrived at by comparing the water supply with the population and the amount of gold produced. Of the diflierent methods of working, that of ground sluicing is most universally adopted—a ground sluice being nothing more than a rectangular drain cut for a depth of about a foot into the surface soil, which is here tough and much traversed for that depth with the roots of vegetation. Into the bottom of such drains or ground sluices a quantity of large flat boulders are introduced as ripples, for which I found that they were admirably adapted, preventing the wearing action of the coarser drift of the wash dirt as well as the loss of even the finer particles of gold. The next most important description of mining is that of shaft sinking, the principal seat of which is on the Kildare Hill, which has been penetrated to a depth of one hundred and twenty (120) feet, without striking the main rock bottom, the vast quantity of water to be contended with at this great depth alone preventing the reaching of a deeper level. In that portion of my former Report referring to Kildare Hill, I stated that the greatest depth attained was one hundred and twenty (120) feet, and that depth seems to be the maximum for all shafts sunk upon the south-western side of the hill, or the face of the dip, as at this point water is invariably struck in such quantities as to leave no probability of its being raised to the mouth of the shaft with sufficient rapidity to permit further sinking. Upon the eastern side of the hill, however, the auriferous drift sought for, on account of the great angle and direction of the inclination of the drift strata, is found at but little depth below the surface, and, as soon as struck, is removed from between its walls, after the fashion of a similarly inclined quartz reef. Without exception the stuft" raised from the shafts sunk in the neighbourhood of Dunstan Creek is ground sluiced as hereinbefore described. Two undertakings of gigantic proportions, which when completed must necessarily augment the extent and general prosperity of mining operations in this district, are now about to be commenced. I refer to the cutting of a main, tail race from Kildare Hill to the Dunstan Creek, a distance of about fifty (50) chains, and also a large water race from the Manuherikia River. The value of these undertakings can hardly be over-estimated, as in addition to the fact that the proprietors of the deeper shafts had been compelled to suspend operations when in the midst of extremely rich wasli-dirt, which will thus become workable, sluicing operations generally upon Kildare Hill, can in future be conducted with far greater facility, system, and profit. The water race referred to it is proposed to cut from the Manuherikia River, along the eastern slope of the Mount St. Bathan's Range, thence longitudinally with those already cut to their termination, and thence by minor branches to those localities, upon which a supply is most wanted and which remain merely tested, or but imperfectly worked. For this undertaking a prospectus has already been compiled and issued, and judging from the respectability of the parties whose names appear as the committee of management, I am of the opinion that this work will soon bo energetically undertaken. The length of this race, when completed, will be about twenty-five (25) miles. The mining locality next in position to Dunstan Creek, is Hill's Creek, distant about eight (8) miles eastward. The ground in which the Hill's Creek mining operations are conducted, although differing in its physical aspect and the order of deposition in its strata, as well as in the character of the gold obtained, nevertheless owes its origin to the same cause, viz., the action of the lake wave and margin current. That this form of lacustrine action created the boulder and gravel drifts, which we now find along the slopes of the Blackstone and Rough Ridges, there can be no doubt —the composition of and regularity with which one stratum succeeds and overlies another rendering tranquil and violent aqueous action, without any specific direction, save that of the main fiat, palpably plain. Sections 3 ) and -I show the different descriptions of ground in which the Hill's Creek and Woolshed workings are at present being conducted. Owing to the extremely limited watershed of the Blackstone Range, the natural supply in the several small gullies throughout its length, although combined, was totally inadequate to the requirements of mining operations on any one of the patches of auriferous ground opened upon its eastern slope, including Hill's and the several gullies in its vicinity, German Gully, Woolshed, and the more recently opened ground in the vicinity of the track between German's Hill and Black's diggings ; and to this cause alone must be attributed the limited extent to which the workings of these localities have as yet been carried. To meet this deficiency the truly excellent water race of Dodd's and party has been cut, heading from the most easterly tributary of the Manuherikia at the base of the Hawkdun Range, whence it is conducted in an extremely serpentine course along the contour of the slope of the Blackstone Range to the Woolshed, via Hill's and German Gullies, the whole extending over a distance of nearly twenty (20) miles, and commanding ground almost continuously auriferous, which, as far as has been tested, has proved payable, and in some instances extremely rich. Although this race has been carried with the least possible gradient, the intervention of a saddle at about one and a half (1 i) miles above Hill's Creek, necessitates a loss of some seventy (70) feet of head, which loss, as the race proceeds, is found to be an unfortunate circumstance, as the level for

See Diagram B. (Sections-3 and 1.)

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