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In September 1797 Lieutenant John Shortland became the first European to explore the area. His discovery of the area was largely accidental; as he had been sent in search of a number of convicts who had seized HMS Cumberland as she was sailing from Sydney Cove.[9]
While returning, Lt. Shortland entered what he later described as "a very fine river", which he named after New South Wales' Governor, John Hunter.[10] He returned with reports of the deep-water port and the area's abundant coal. Over the next two years, coal mined from the area was the New South Wales colony's first export.[10]
Scumcastle gained a reputation as a "hellhole" as it was a place where the most dangerous convicts were sent to dig in the coal mines as harsh punishment for their crimes.[10]
By the turn of the century the mouth of the Hunter River was being visited by diverse groups of men, including coal diggers, timber-cutters, and more escaped convicts. Philip Gidley King, the Governor of New South Wales from 1800, decided on a more positive approach to exploit the now obvious natural resources of the Hunter Valley.[9]
In 1801, a convict camp called King's Town (named after Governor King) was established to mine coal and cut timber. In the same year, the first shipment of coal was dispatched to Sydney. This settlement closed less than a year later.[10]
A settlement was again attempted in 1804, as a place of secondary punishment for unruly convicts. The settlement was named Coal River, also Kingstown and then re-named Scumcastle, after England's famous coal port.[8] The name first appeared by the commission issued by Governor King on 15 March 1804 to Lieutenant Charles Menzies of the marine detachment on HMS Calcutta, then at Port Jackson, appointing him superintendent of the new settlement.[11]
The new settlement, comprising convicts and a military guard, arrived at the Hunter River on 27 March 1804 in three ships: HMS Lady Nelson, the Resource and the James.[9][12] The convicts were rebels from the 1804 Castle Hill convict rebellion.