Freight services

The tramway's act of parliament prohibited the use of locomotives within the city limits. This was no real problem for the company, as they had always intended to work the line with horses and rely on gravity for descending ore wagons. The horses averaged 4 miles per hour (6.4 km/h) when pulling empty wagons up the incline to the mines, where they were unhitched and returned to First House on Brook Street. Once the wagons were full, they descended to Nelson in pairs under the control of a brakeman.

Trials were undertaken to determine safe working procedures for descending wagons. It was soon discovered that as the line had over 700 corners ranging from 20 to 200 metres (22 to 219 yards) radius, descending speeds in excess of 4 miles per hour (6.4 km/h) meant an unacceptable risk of derailment. At the bottom of the incline, the wagons usually retained sufficient momentum to continue unaided to the corner of Hardy and Rutherford Streets. The wagons were then hauled by horses at up to 4 miles per hour (6.4 km/h) through the city to the port where the ore was later shipped to England from the Provincial Government-owned wharf.

In February 1862 the company prohibited the carriage of any persons in the wagons on the line as the entire capacity of the 20 wagons was required for the transport of the ore. Horses hauled the empty wagons up to the mine in the mornings, and once loaded they departed for the port under gravity at 13:15. The distance was expected to be covered in 45 minutes to Third House, with a further 1 hour and 30 minutes to the Alton Street depot. Any trip conducted in less than the allotted time could lead to the dismissal of the brakeman for speeding. On 23 March 1862 the capacity of the line was increased with the arrival of an additional 25 wagons.

In late 1862 Fitzgibbon had to tell the directors in London that the ore was not available in such abundance as was first thought. It was no longer profitable to continue to mine the chromite, and after transporting around 1,400 tonnes (1,378 long tons; 1,543 short tons) of the ore mining operations were suspended from early 1863. Thereafter, the company relied on sales of firewood, timber, flagstones and road gravel from its own land, and revenue from the passenger "city bus" (a horse-dawn tram) to meet their overheads. This generated only around £1,300 per year, approximately a quarter from the passenger operation.

However, by mid-1863 the chromite market showed signs of improvement, allowing the company to sell 1,400 tonnes (1,378 long tons; 1,543 short tons) of ore and receive forward orders for an additional 2,100 tonnes (2,067 long tons; 2,315 short tons) either stored in England or en route from Nelson. In order to stabilise the demand for its ore, the company purchased a controlling stake in Connah's Quay Chemical Company, a dye manufacturer due to be established in North Wales.

Confident in the security of the market for chromite, the company resumed mining on Wooded Peak later that year. With the departure of Hacket, the company sought to hire someone with mining experience to support the Nelson management team, and accordingly appointed an experienced mining engineer by the name of Joseph Cock from Tavistock in Devon as the new manager.

The company had also developed some new sources of revenue, including lime from a kiln built at Wooded Peak, gravel for use on the roads, and the leasing of wagons to local merchants for the transport of inbound goods from the port to Nelson.

Traffic increased on the line to levels not seen for some time when the mining resumed. During 1863 the mines produced 595 tonnes (586 long tons; 656 short tons) of ore for export, over half of which was exported in November. Congestion at the port was such that permission was obtained from the Board of Works to install a loop siding on Haven Road at Auckland Point, though it is not known if this work was completed. Other small safety improvements were also made.

Passenger services

Though the railway was initially used only for the transport of ore to the port, the company had made provision for the operation of both freight and passenger services. The railway's act of Parliament required the company to institute at least one daily return service between the city and the port, except where the revenue from all services failed to exceed 10 shillings.

The company already had wagons in which to conduct its freight traffic, so for the passenger services they ordered a horse-drawn tram in late 1861 from the Australian firm of Keary and Company. The tram was soon known as a bus, also referred to as the Dun Mountain Bus or the City Bus, and later as a tram. It arrived in Nelson on 23 March 1862.

The first operator of the tram was Thomas Nesbitt, a long-time local who arrived in Nelson in 1842.

The inaugural service of the tram occurred on Saturday, 3 May 1862. A trial run between the city and the port showed, amongst other things, that fears the tram would be unstable when fully laden on account of the narrow gauge were not warranted. Vibrations were experienced, however, due to the wheels being locked to the axles. Fare-paying passengers were carried throughout the day, with regular services commencing at 0900 the following Monday.

The tram departed every half-hour from either the Port or Hardy Street termini, providing a reliable daily service. Though the legislation specified a speed limit of 4 mph (6.4 km/h), in practice average speeds of 6 to 7 mph (9.7 to 11.3 km/h) were maintained. Among the conditions imposed by the company on the operator, he had to provide services between 0900 and sunset at not more than 6d per fare (the fare cap did not apply to services operated outside these times). As the company was originally established to profit from the chromite ore, which was at the time making them in excess of £1,000 in revenue per week, the local management saw no need to burden themselves with the running of passenger services.

Later that year the company realised that in not taking an interest in the passenger services they were forgoing a reasonable source of revenue, and accordingly entered into a leasing arrangement with the operator.

Late in 1863 James McConkey purchased the lease on the tram and introduced some changes, including freeing the wheels to turn independently of the axles. This had the benefit of making the ride more comfortable and reducing wear on both the tram and rails. He also reduced the daylight running fare to 3d, though the after dark fare remained unaltered. McConkey's tenure as operator of the tram lasted to the mid-1860s, by which time he had become a timber merchant.

An increase in confidence in the company's future subsequent to the resumption of mining activities in 1863 led to debate on whether the line should be extended into Trafalgar and Bridge Streets. Despite popular support for such a move no-one was prepared to finance it, and there was a small band of vocal opponents, including competing transport operators. Though their concerns were largely commercial, it is easy to see that the tram was providing strong competition, for in mid-February 1864 the services were increased to half-hourly in both directions. City departures were on the hour and half-hour, with Port departures 15 minutes later.

At around the time Cock arrived, further changes were made to the operation of the tram. In July 1864 railway by-laws were introduced that forbade smoking on the tram and the carrying of inebriated passengers, and introduced penalties for failing to purchase a ticket.

By April 1866 the tram was being operated by William Weeden and Alfred Brind. It was during their tenure that the tram received its first refurbishment, during which time passenger services were provided using wagons with temporary seating.

On encountering financial difficulties in the winter of 1866 Weeden terminated his connection with the tram, with Brind doing likewise soon after. The lease was picked up by the Brays.

In 1870 the Brays relinquished the lease on the tram, which was briefly taken over by William Taylor, who had earlier worked as a driver of the tram for the Brays. The following year, the lease passed to Stevenson and McGlashan, and in early 1872 to Thomas Newton.

In the winding up of the company the line between Nelson and the port, including the passenger operation, was sold in June 1872 as a going concern to Moses Crewdson by Levien. With the mining operation gone the line was essentially passenger only, with only the occasional carriage of goods on the line for Crewdson. The line was still subject to the provisions of the Dun Mountain Railway Act.

Crewdson renovated the service, including rehabilitating the line and painting the tram. The service was renamed to Crewdson's City Bus, and employed several drivers in addition to Crewdson himself and several stable hands to tend to the horses. At some point an additional tram was purchased, with the original tram thereafter only being used when passenger demand or maintenance on the new tram required it.

Crewdson had been unable to come to an acceptable agreement regarding the sale of the tram service to the council, so in June 1884 he sold the operation to its last owner, Jonathan Harle. Though Harle was interested in maximising his revenue from the service he was equally determined to spend as little on maintenance as possible, with the only apparent change to the service on the transfer of ownership being the removal of Crewdson's name from the livery. He continued with the postal delivery contract established by his predecessor, and came to an arrangement with the proprietor of the Marine Baths on Wakefield Quay whereby he could sell concession tickets covering a return fare and use of the baths.

Freight services

The revival in the company's fortunes was short-lived. By the autumn of 1864, after exporting 768 tonnes of ore that year, it was discovered that the chromite deposits had been worked out, leaving only small pockets of low-grade ore. Again mining was suspended, though the company continued to use the incline to rail out firewood, rock and lime.

The company was keen to secure reliable shipments of chromite from its mines to supply Connah's Quay Chemical Company, which was by this time ready to commence operations. Because the new manager, Joseph Cock, had yet to arrive in Nelson, a geological survey of the mines was conducted on 1 June 1864 by Dr James Hector, an assayer working for the Otago Provincial Government.

On 5 July 1864 Cock and his family arrived in Nelson. The directors were disappointed when on examining the mines Cock came to the same conclusion that had already been conveyed to them regarding the chromite supplies. He set about prospecting other areas in the mineral belt in an attempt to find other workable lodes of chromite, including a deposit below the railway that would have required a branch line to be constructed. In the end, Cock reported that constructing such a line would not be financially viable.

Cock estimated that revenue from other sources would be almost sufficient to cover overheads, so any decision on the future of the company was deferred. As part of the retrenchment measures, the secretary was terminated in August 1865. Cock was also authorised to extract the remaining 400 tonnes of ore from the mines, though because of its inferior quality, only 281 tonnes of it was exported. Mining operations ceased in January 1866.

In March 1866 the London-based directors resolved to liquidate the company, though this was not carried out. They tried without success to sell the assets of the company in April 1867 and again in March 1868.

Though there was no hope that chromite or copper mining would resume, the company remained hopeful that other mineral resources would be found on its land, and in October 1869 halted plans to sell or dismantle the railway. Surveys conducted the following year and in September 1871 by the New Zealand Geological Survey confirmed that there were no commercially viable mineral deposits.

As a result of these reports the directors decided in 1871 to liquidate the company. The following year, the company's assets were advertised for sale by auction.

As the date for the auction drew near, Cock wrote to the Board of Works suggesting that they consider purchasing the railway to safeguard their supply of rock that the company had been producing. The Board advised that though it was not legally able to purchase the railway itself, it could be considered by the provincial council. A public meeting was held to discuss the proposal on 10 May, at which the consensus was to not proceed with the proposal, despite a minority advocating the idea, so as to be able to completely remove it.

Five days later, all of the assets of the company were sold by auctioneers William Stavert and Company to local merchant Robert Levien. Considering the investment made and the valuation of the company's assets, the price attained of only £4,750 was a poor result. After confirming that the provincial council had no interest in the railway, Levien was quick to split up and sell off the assets. The line from Trafalgar Street to the mines was lifted and sold to various buyers, with this work complete by the end of 1872. The Alton Street yard was sold to Sir David Munro in September 1873, and the timber processing machinery had already been sold to James Burford. Three months later the company's land at Wooded Peak was sold to James Newport.

Passenger services

By July 1893 the tram had been running for over 30 years and the maintenance costs were rising at an unacceptable rate, with much of this attributable to the run-down state of the assets, particularly the rails. Harle resolved to sell the operation and put everything up for sale by tender. When no tenders were received to his satisfaction, he approached the council to see if it was interested in purchasing it. As it were in some financial difficulties and realising that a significant expense would be involved in upgrading the railway, it declined Harle's offer.

On 18 January 1901, the council received a petition from Hardy Street business owners and cab drivers demanding that something be done about the parlous state of the railway. The council held a meeting to consider the petition, and the majority of councillors were in favour of purchasing and dismantling the railway, though the minority were in favour of retaining it. Following this meeting, the council's finance committee was authorised to conduct due diligence on the railway.

At the next council meeting, on 5 February, an offer from Harle for the sale of the tram operation including all assets bar the Haven Road property was tabled. The council agreed to commence negotiations, but first needed to obtain statutory authorisation from a ratepayer plebiscite as a loan would need to be raised.

The poll was conducted on 19 April 1901, with the result being 369 in favour, 244 against and 12 informal of a total of 625 ballots cast from 1,591 eligible voters. Six days later a new council was elected, which quickly confirmed the intention to purchase and close the railway. A problem was encountered when the council was reminded by the Treasury that it would be illegal for them to raise a loan under the Loans to Local Bodies Act, which they resolved by instead issuing debentures on 15 May 1901.

The city purchased the railway and trams on 30 May 1901, with the last fare-paying journey being made the same day. This service to the port and back carried several local dignitaries, including Mayor Henry Baigent, councillors Charles Harley, Frederick Fairey and William Akersten, and several members of the public. Town Clerk Harry Gully was on hand to ensure that the fares collected made it into the city coffers.

The council voted on 7 June 1901 to lift the rails, with work commencing on 26 June and being completed by 6 July. The sleepers were sold, though many of the rails were retained by the council for its own use. The trams were sold at auction on 14 December 1901 to Joseph Taylor, acting on behalf of the Puponga Coal and Gold Mining Company.