The Island is located at Thompson Bend on the Yarra River at Warrandyte, Victoria, Australia, approximately 24 kilometres (15 mi) north-east of Melbourne. It was created by gold miners in 1859–60, during the Victorian gold rush. They dug a diversion channel to alter the course of the Yarra River, providing access to the alluvial gold in the exposed river bed.
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The canal was widened by subsequent flooding becoming the main river course, with the previous river bed becoming a willow-choked backwater.
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Mining Registrars and Surveyors Reports for the St. Andrews Division[2] date the diversion of the river into a canal as May–July 1859. The work cost £7,000. There was more work in November 1859 and February 1860.