Captain's Flat mine owners had requested the government to build a railway line from Bungendore to ship ore out. However after surveying the mines, it was deemed that the ore was of insufficient quality and contained too much lead and zinc making smelting difficult, to justify the expense. The request for a railway was refused.

Towards the end of 1899, the mines ceased smelting copper and turned its attention once more to gold. A cyanide treatment plant was built to treat the gold-bearing ore (gossam), but this was a complete failure. Lake George Mines Company ceased its operations and after the dismantling of the equipment was completed, the town fell silent.

In a matter of days, the population fell from over 2000 to less than 300, despite local belief that the mines would soon reopen. A push was made to have Captain's Flat tendered as the site for the planned national capital, but as the water supply was poor and unreliable, this was never really considered. Finally it was realised that the Captain's Flat boom period was over and the town settled into a moody silence and threatened to become a ghost town.

Mr. Channon maintained the leases and kept pumps working in the shafts to prevent flooding, but this was the full extent of the mine workings. Captain's Flat dropped out of the public eye, its population continued to dwindle and it remained that way for nearly forty years, despite a series of test drilling made in 1925.

National Mining Corporation, a British company, conducted £42,000 worth of tests which resulted in the mines reopening for the extraction of iron pyrites to be shipped to Port Kembla. The mining leases were taken up again by the newly reborn Lake George Mines Company, shares increased in value and small scale mining began.

Some 2,320 tons of ore was treated in the initial plant and by 1937, ore reserves were estimated at 5,000,000 tons. Large scale mining production was approved and it looked like the town was on the way back.