The timber township of Powelltown, Victoria lies N.E. of Yarra Junction, 60 miles east of Melbourne and in the site of the mill of the Victorian Hardwood Company Proprietary Ltd.A lift gauge railway owned by the company connects Yarra Junction on the Warburton line, with the township through two or three smaller mill centres on the way.The company has been operating for some 12 years. In the divide, about four miles from Powelltown, between the Little Yarra and Latrobe rivers, cutting was continued with material being handled by winch and double incline haulage over the divide. A small bush locomotive dealt with the traffic between the divide and the cutting site.In order to reduce costs, which were heavy at the haulage, the company decided to make a continuous railway from Powelltown to the bush by means of a tunnel through the divide.Hand bore holes were put down on the proposed line of tunnel and showed that the divide at this point consisted of decomposed depth of about 100 ft. towards the eastern or Latrobe side - and that the undecomposed granite summit lay to the west of the surface summit.The bores also served to locate the underground water line, this was afterwards found to rise and fall with wet and weather.To avoid tunnelling in hard and heavy water, the grading of the was laid out with the summit of the hard granite the point in the line.