In 1863 Henry Maxwell Lefroy went exploring for pastoral land east of the Yilgarn, his reports encouraged other explorers, and a 1864 expedition led by Charles Cooke Hunt, named Lake Lefroy in his honour. December 1896, prospector Pierce Larkin discovered 106 ounces of gold near the original townsite of Red Hill on the northern shores of Lake Lefroy.
The town of Kambalda was officially proclaimed on December 10, 1897 - although the residents continued to refer to it as Red Hill or Red Hill Camp. The following year the Red Hill (WA) Gold Syndicate was formed to promote underground mining in the region but the riches were mostly exhausted, and by 1906 the company was forced to withdraw from the area. By this time Kambalda had a population of over 1000, living on streets named after the first mining lease holders. Small mining operations continued around the area but the Red Hill Camp eventually came to a close.
After the First World War many prospectors worked north and south of Lake Lefroy, the St Ives minesite was established but short-lived.
Prospecting continued during the depression, the largest gold nugget yet found in Australia the "Golden Eagle" nugget, was the most famous. The nugget was uncovered by Jim Larcombe at Larkinville near Widgemooltha in 1931. News of this spectacular find attracted prospectors from all over the country including George Cowcill, who would later discover nickel at Kambalda.
In 1954 Cowcill was prospecting for uranium, sending promising rock samples to the School of Mines in Kalgoorlie for analysis - the samples contained traces of nickel. The Western Mining Corporation Group initiated a comprehensive geological survey of the area, and in 1966 commenced nickel mining at Kambalda.
Kambalda became a brand new town. Power came from the Fimiston Station at Kalgoorlie and water was supplied by connection to the Coolgardie-Norseman pipeline. Buildings went up on the original townsite (there were no remnants of the former settlement), and Western Mining took pains to ensure the new town plan corresponded to the original street layout. By the end of 1967 the town was too small for the growing mining venture but planning had included an additional site - the two towns were named Kambalda East and Kambalda West. By the end of the 1960s, Western Mining was expanding its drilling operations, and the milling facility brought profit from other mining companies in Widgemooltha, Coolgardie and Carnilya Hill. The two Kambaldas grew to a population of over 3,200 including a workforce of 1,335.
Success led to a boom on the sharemarkets, as was the case with Poseidon after their discovery of nickel at Windarra in 1969, their shares rose from 1 dollar in September to 200 dollars in December of that year. But during the 1970s the world nickel market collapsed, due to Canada and South Africa also mining nickel, and a global economic recession. As a result Nickel production was reduced, however Western Mining continued its exploration activities and diversified into gold mining and processing in the Kambalda area.