The Stuart brothers set up the first sluice boxes at Gold Creek in May, 1862, but the first major gold strike in Montana was at Grasshopper Creek on July 18, 1862. Gold-seekers attracted to the area quickly exceeded the number of claims, and, of course, not everyone who came found gold.
They returned to Bannack with their grubstake, and a promise to keep the discovery a secret. Their grins and newfound wealth gave the secret away. Returning to Alder Gulch a few days later, they found half the town of Bannack following them. Excitement reached a fevered pitch as they reached the place of discovery on June 6, 1863. Miners quickly staked claims along the gulch, and Virginia City's first buildings were soon under construction. Nevada City grew at the same time.
Word of the discovery spread quickly and thousands soon flocked to Alder Gulch. Anyone with a gold pan could "mine" at first, but surface riches were soon exhausted, and more laborious placer techniques such as drift mining came into use. In July 1863, hard rock gold was discovered nearly eight miles above Virginia City, and the town of Summit soon grew. By fall of 1863, an estimated 10,000 people were in Alder Gulch and the towns of Junction, Adobetown, Nevada City, Central City, Virginia City, Highland, Pine Grove and Summit formed a nearly continuous settlement eleven miles long.
A huge population of gold seekers arrived briefly in Alder Gulch, some estimate as many as 30,000 in the spring of 1864. Congress created Montana Territory on May 26, 1864, exactly a year to the day after the discovery of Alder Gulch gold, and mainly because of it. But with a new gold strike at Last Chance Gulch (Helena) on July 14, 1864, hundreds left overnight, and by fall the population was back to about 5,000. The territorial capital moved from Bannack to Virginia City in 1865.
Through the later 1860's, placer claims were consolidated, and hydraulicking began to replace shaft and drift placer operations. A complex and expensive system of dams and ditches brought water from the mountains to hydraulic mines near Nevada City. High up Alder Gulch, several lucrative hardrock mines operated stamp mills. Four Chilean mills, brought at tremendous labor over the Bozeman trail, operated at Union City. But the hard-rock gold was richest near the surface, and ore values lessened as the shafts deepened. After the territorial capital moved to Helena in 1875, Virginia City slowly lost population. Hydraulic mining and several large hard-rock mines continued to operate into the early 1890's.
In 1897, the Conrey Placer Mining Co. began using the new placer mining technology of dredging. Four huge dredges were eventually built and the installation of high voltage power lines, brought in to power the dredges, made electrical history in Alder Gulch. Dredging continues into the 1930's. At the beginning of World War II, however, gold was declared a "nonessential mineral," and dynamiting was discontinued. While a few small placer and hard rock operations continue even today, Virginia City's economy has depended upon tourism since the beginning of the Bovey's restoration efforts in the 1940's.
The area near Virginia and Nevada Cities in Alder Gulch held the richest placer gold deposits in Montana, and some say richer than anywhere on earth. According to research done in the 1920's, over one hundred million dollars worth of gold had been removed from the gulch. At today's prices, Alder Gulch has yielded over two and a half billion dollars worth of gold.