The State Coal Mines at Wonthaggi were established as an emergency measure to provide urgently needed black coal for the Victorian Railways during a protracted strike by New South Wales coal miners. Opening on 22 November 1909 on coal seams that had earlier been proved by a Government drilling program, the mine dispatched its first consignment just 3 days later with the coal being taken to Inverloch by bullock wagons for loading onto ships. A branchline from Nyora on the South Gippsland line was built in 1910 by the time production was in full swing. As further shafts were opened up, production increased from 41,000 tons in 1910 to reach a peak of 662,000 tons in 1930.
Initially the mine was highly profitable but production declined in the 1930s as larger seams were worked out and the mine was hit by industrial strife. Although operations became unprofitable, the Railway Commissioners opted to subsidise the mine in order to provide a guaranteed coal supply and the State Coal Mines remained in operation until 1968 when regular steam locomotives operations were finally phased out.