Reports from miners and geologists on Custer’s 1874 expedition to the Black Hills gave official confirmation to reports of gold deposits in the hills. For the next two years, the army attempted to protect the Indian-owned hills from prospectors while demand for entry to the gold fields grew.

When negotiations to purchase the Black Hills and/or its mineral rights from the Sioux broke down in 1876, the army withdrew and a gold rush ensued. Gold camps were established quickly at Custer, Lead, Deadwood and Hill City, while ‘Hay Town’ to the east of the Hills, (later Rapid City) became the major supply center for the region. The two principle road links to the hills were from Fort Pierre to the east, and from Bismark, North Dakota, where the Northern Pacific Railway had its terminus.

The railroads were of vital importance, bringing labor and supplies such as mining machinery to the remote region. The Chicago and North Western constructed a line to Pierre, and the Chicago, Milwaukee and St. Paul reached Mitchel, both in 1880. The first railroad to the hills was the Fremont, Elkhorn and Missouri Valley Railroad (later part of the Chicago and North Western) which reached Buffalo Gap in 1885 and Rapid City the following year.

The first wave of gold prospectors worked the placer gold, gold eroded from the surrounding rock and deposited in gravel found in creek beds. Although groups of miners would sometimes co-operate to work large water sluice systems or extensive claims, the gold rush period was essentially characterized by small groups working low cost sites.

Many claims were staked on underground deposits of hard rock ores early in the gold rush but most remained undeveloped due to the easier profits to be made from the placer sites and the low levels of capital available to the prospectors. Claims on gold bearing quartz rock had already reached considerable numbers by the end of 1876: 147 in the Deadwood area and 70 around Custer.

Once underground working started in earnest, production quickly outstripped that of the rapidly diminishing placer resources. The early hard rock mines brought a second boom to the towns of the southern Black Hills while new towns, such as Rochford, grew up on the previously unexploited mine sites.

As the size of mining operations expanded outside investment became an important factor. Capital was forthcoming from local banks, and businessmen in established mining regions, such as California, and the industrialized East. The Homestake mine was initially financed by a Deadwood merchant and a ten stamp mill was built, but it was investment from California that brought an eighty stamp mill and set the mine up as a large scale producer.

By 1878, over $1,000,000 of California capital had been invested in the Black Hills. As the scale of hard rock mining increased, there was a parallel decline in reserves of “free milling” ores (those from which gold and silver could be removed by simple milling techniques). Deeper refractory ores – whose metal content was held in complex and hard to dissolve chemical bonds – required the construction of new mills using the techniques of chlorination and cyanidation.

With correspondingly rising overheads, both in the mines and in the mills, the small, independent mines began to be consumed by large corporations financed from outside the region.