Gold was first discovered by James Matteson and Frank Heck in 1872 in what would become the Osceola mining district, 3 mi (4.8 km) to the west of what would become Great Basin National Park.

The town of Osceola grew to 1500 residents, extracting almost $2 million in gold, including a 24 lb (11 kg) nugget.

Gold was found in nearby Dry Gulch, but its extraction would require large scale engineering.

[2] The project was built to serve the Osceola Gravel Mining Company's placer gold mine, which required enormous quantities of water to blast apart gold-bearing gravel and rubble deposits, and was capable of delivering 2500 miner's inches of water.

Extensive improvements were made to the mining area, including expansion of the receiving reservoir, new sluices, and two 8 in (200 mm) hydraulic monitors.

[1] The East Ditch no longer carries water and is overgrown, but sections of flume remain.