In 1876 a certain James Hooper discovered what he thought was gold-bearing gravel in a small creek off the Karatara River on the farm 'Ruigtevlei' near Rheenendal, and his suspicions were confirmed by the town chemist, William Groom.

Charles Osborne, an engineer working on the road from George to Knysna, was granted £100 by the Cape Government to prospect for gold in the area.

In the meantime various people such as Thomas Kitto and E. J. Dunn, the Cape Government Geologist, discovered alluvial gold in the area and reported favourably on mining prospects in 1880.

Osborne returned and prospected in the catchment area of the Homtini River, finding a promising reef in 1886.

The news spread quickly, luring fortune-seekers from as far afield as the United Kingdom, California and Australia, and within weeks a village of 135 stands, hotels, boarding houses, general stores, a post office, police barracks and a hospital had been erected.