Lauder, Spears and Howland of Toronto began producing lumber under contract to the Schroeder Mills & Timber Co., of Milwaukee, Wisconsin.
The firm intended to transport the lumber with horses, along a rough road to Pakesley, on the Canadian Pacific Railway (CPR), 10+1⁄2 miles (16.9 km) to the west.
After the mill was completed, Mr. Howland persuaded his partners to build a railway, to carry the sawn lumber to the CPR at Pakesley, although James Lauder and Joseph Spears thought the operation would run just as well without that additional expense.
Lucien B. Howland was the former General Manager of the Irondale, Bancroft and Ottawa Railway, built by his father-in-law, the late Charles J. Pusey.
The bank representative was impressed after examining the whole operation, and advised the partners his report would be favourable, and would definitely recommend that their line of credit be extended.
In addition to the mill and railway, Lost Channel grew to contain a bunkhouse, cookery, hospital, school and single dwellings for the workmen.
About 8 locomotives were used on the railway at different times and there was a truck mounted on flanged wheels, outfitted with bench seats to transport the workmen.
Logs from the township of Brown, on the Still River, and Ferrie, on the Magnetawan, were either boomed and towed to Victoria Harbour, from Byng Inlet, or placed on flat cars and delivered by the CPR to Pakesley.