Dunsmuir's grandfather, Robert, had leased coal properties and bought out local competitors in the days before the arrival of the railway in the 1840s permitting him to increase prices.

In 1832, in the midst of this prosperity, Robert's mother, father, grandmother and two of his three sisters died within days of each other in a cholera epidemic which swept the area.

Three years later, grandfather Robert died a relatively wealthy man, leaving a third of his estate in trust for his orphaned grandchildren.

[3] At the end of 1850, Dunsmuir's mentor, and his aunt's husband, Boyd Gilmour, had signed on with the Hudson's Bay Company to exploit a coal finding on the northeast coast of Vancouver Island at Fort Rupert (near present-day Port Hardy).

Because some of those who were to travel with him decided not to go upon hearing news of the conditions and prospects there, Gilmour sought replacements for his party at the last moment.

[3] On July 18, 1851 they set sail for Fort Rupert, and when they arrived on August 9, the three-year term on the contract with the Hudson's Bay Company began.

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.

[4] 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 6,193 acres (2,506 ha) that made up its Nanaimo operation.

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 1,600 acres (647 ha) in a band 1,000 yards (914 m) wide and 4 miles (6 km) long including the north half of Diver Lake and running right to Departure Bay in the area known as Wellington.

The home he built for his wife Joan Olive (White) Dunsmuir in Victoria, British Columbia is called Craigdarroch Castle and is today a popular tourist destination and National Historic Site of Canada.

His daughter Effie (Anne Euphemia) Dunsmuir was married at St. George's, Hanover Square in London, England on February 27, 1900, to Captain Somerset Gough-Calthorpe, R.N., Naval Attache to the British Embassy, St. Petersburg.