Lost Channel, Parry Sound District, Ontario

Lauder, Spears and Howland of Toronto began producing lumber under contract to the Schroeder Mills & Timber Co., of Milwaukee, Wisconsin. In the spring of 1917, they built a large sawmill on Kawigamog Lake, a widening of the Pickerel River. The firm intended to transport the lumber with horses, along a rough road to Pakesley, on the Canadian Pacific Railway (CPR), 10+1⁄2 miles (16.9 km) to the west.

Initially, Messrs. Lauder, Spears and Howland, had established their operation in 1913 at Palmer's mill, on the CNR at Mowat, after John Schroeder had acquired standing timber in the townships of Mowat and Blair. Another mill near Mowat was Cole's, up on Key Lake, some twelve miles (19 km) from the railway.

In the summer of 1913, Schroeder made arrangements for logging in the townships of Wilson, Ferrie and Brown. He then contracted James Ludgate to take out the timber. Ludgate made his headquarters at Salines, later known as Drocourt. It was not until the autumn of 1916 that Schroeder Mills & Timber Co. purchased outright, the 138 square miles (360 km²) of timber berths in Mowat and Blair, from the Victoria Harbour Lumber Co. It was following this purchase, that Lauder, Spears and Howland began construction of the new mill at Lost Channel.

After the mill was completed, Mr. Howland persuaded his partners to build a railway, to carry the sawn lumber to the CPR at Pakesley, although James Lauder and Joseph Spears thought the operation would run just as well without that additional expense. Lucien B. Howland was the former General Manager of the Irondale, Bancroft and Ottawa Railway, built by his father-in-law, the late Charles J. Pusey. The relationship of these three men can be traced back to 1909, when Lauder and Spears, leased the mill of the Wilberforce Lumber Company, at Wilberforce a station on the IB&O.

The first locomotive on the Key Valley Railway, from Pakesley to Lost Channel, was CNR 4-4-0 No. 50, (formerly IB&O No. 3), acquired from Canadian Northern in 1917. Arrangements were made to purchase a second locomotive from Canadian Northern, also of the 4-4-0 wheel arrangement, former Central Ontario Railway No. 39.

Before the railway was completed, however, Lauder Spears and Howland were experiencing financial difficulties. It seems the railway cost several times more to build than had been estimated. When they applied to the bank for additional funds to complete the project, a representative was sent up to make a report on the situation.

The bank representative was impressed after examining the whole operation, and advised the partners his report would be favourable, and would definitely recommend that their line of credit be extended. During the long wait for the southbound train at Pakesley, an executive of Schroeder Mills & Timber Co. advised the banker that his company would assume responsibility for the loan, if in turn the bank would transfer to them all of Lauder, Spears and Howland's assets, held by the bank as collateral. A few days later the bank informed Lauder, Spears and Howland that their line of credit would not be extended. In addition they were ordered to repay a sizeable portion of their bank loan within 30 days. The partners tried frantically to raise enough money to satisfy the bank. Unable to do so, Lauder, Spears and Howland, were swept aside - ruined men.