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Gold beneath the sea - the story of the R.M.S. 'Niagara'
The outbreak of the Second World War, and enactment of National Security Regulations (Wartime Banking Control) caused additional functions to be assumed by the Bank’s Secretary’s Department. The Commonwealth Bank became the main point of contact between the Reserve Bank of New Zealand and the Bank of England in the R.M.S. Niagara salvage operation. This rich body of correspondence, detailed records and personal stories provides a comprehensive administrative, operational and legal narrative of a complex, secretive wartime salvage enterprise. It is a story of international co-operation and inter-bank trust during a global crisis. It profiles one of the most ambitious underwater salvage operations ever undertaken and the development of revolutionary deep-sea diving tools that made it possible. It is a story that continues to be the subject of great interest and research
'The Battle of France is over. I expect that the battle of Britain is about to begin'. 1
The day following Winston Churchill’s ‘Finest Hour’ speech on 18 June, 1940, a German attack on the Commonwealth was waged underwater far from European shores. En route from New Zealand to Canada, the Niagara was sunk by German mines in the Haruaki Gulf off the east coast of New Zealand. The ship went to the bottom, not as a human tragedy (all passengers and crew were safely rescued) but as the disappearance of a strategic asset: a consignment of 590 British gold ingots worth just over £2.5 million British pounds from the Bank of England to fund the war effort. What followed was equal parts engineering odyssey and international institutional co-ordination and at its centre sat an unexpected role for the Commonwealth Bank of Australia (the Bank).
An underwater enemy
On 13 and 14 June 1940, the German auxiliary raider ship Orion, covertly entered New Zealand waters disguised as a merchant cruising vessel and laid 228 contact mines in the Hauraki Gulf. The mines were placed strategically along the regular inbound / outbound route used by vessels leaving Auckland on the Pacific route to the rest of the world. Five days later, on 19 June 1941, the Niagara departed Auckland consigned with gold and small arms ammunition and unwittingly sailed over a seabed rigged to explode. At 3.40 am the ship struck two underwater contact mines and began to sink quickly. Fortunately, all 349 passengers and crew escaped in 18 lifeboats; the only casualty was the gold bullion.
The sinking of a single liner could carry consequences far beyond the loss of the ship itself. The gold that sank with the Niagara belonged to the British Treasury and was being sent to the United States as payment for military supplies. Britain needed funds to secure weapons, munitions, aircraft, and other war time materials from the United States. As the US was still officially a neutral ally, payment had to be made in gold, as neutrality laws prevented the U.S. from extending credit. The gold onboard had recently been housed in the strongroom of the Bank in Sydney, and so there were natural concerns about the repercussions of this financial tragedy. The day after the ship sank, an encrypted message was sent to the Bank of England asking if they wished to take any action.
'From that message, commenced an epic story of heroism and devotion to duty, in which the Commonwealth Bank, acting throughout on behalf of the Bank of England, was a privileged participant in an exciting and secret operation'. 2
The role of the Commonwealth Bank
The Bank’s role in the process extended well beyond financing the operation. It became the central coordinating body that translated diplomatic complexities into executable directives, resolved legal uncertainties through binding agreements, and ensured the return of the gold bars. Consequently, the ‘Niagara files’ contain records of detailed account‑keeping and intergovernmental correspondence as well as details of the physical recovery of the gold itself.
From the start, the Bank understood two things: the gold was of great monetary value and priceless in its potential to influence the course of the war. The entire salvage process was treated with a level of secrecy appropriate to wartime financial control measures. The Bank framed the recovery as a custodial responsibility - acting ‘for’ the Bank of England and to ensure that all gold recovered was done so under strict Bank supervision. This elevated level of secrecy was a practical shield against opportunism, leaks to the press, and the political complications and risks associated with gold movement during war.
The salvage was complicated: its extreme conditions produced extraordinary claims by those who might participate. Crew bonuses, overtime, tax implications for payments to divers, and disputes over who had paid which wages were all argued in cable traffic and letters found in these files. The Bank did not automatically approve the claims but sought legal guidance and weighed the reputational cost of generosity against legal obligation. In doing so it performed a type of public‑interest accounting: ensuring that those who undertook the highly risky operation were paid fairly, while protecting the public purse and the British Treasury's property. Most importantly, however, the Bank preserved continuity of custody of the gold. Bank agents supervised re‑boxing, sealed contents, logged identifications, and handed consignments to the Bank’s secure facilities. In the end, when congratulations flowed from London and officials took stock, the bullion had passed through a documented chain that made the recovery not only an engineering triumph but a triumph of financial accountability and transparency.
R.M.S. “Niagara” gold salvage - on board the Claymore bringing up the diving bell - 1941
The salvage process
The United Salvage Pty Ltd syndicate, led by Captain John Protheroe (J.P) Williams, were engaged to conduct the salvage. Williams was an experienced master mariner and salvor, who would later be knighted for his service to the Empire. The Bank acted as the official representative of the Bank of England in the salvage and repatriation operation. The Bank of England agreed to pay the bulk of expenses plus 2.5 per cent commission on gold recovered. Gordan Murray Shain, as the Commonwealth Bank’s Deputy Governor, played a pivotal coordinating and facilitative role in the salvage. He initiated and maintained high‑level contacts with naval and government authorities; pressed the Navy to locate competent salvage expertise; identified and engaged Captain Williams and the United Salvage syndicate; negotiated and signed contractual and financial arrangements on behalf of the Bank (and the Bank of England); managed strict secrecy and communications (including coded cables); arranged banking and logistical support in New Zealand (including liaison on transport and local banking); and actively mediated the contentious post‑salvage bonus (2.5 per cent) and reimbursement discussions. These actions were essential in enabling the operation’s technical, diplomatic, and financial success for all parties.
‘Provision was made for a representative of the Bank to attend the salvage operation and take custody of any bullion that might be brought to the surface.’ 3
Choosing and fitting a ship became a strategic piece of that puzzle. As all seaworthy vessels has been commandeered for the war effort, it came down to taking what was available and the 40-year-old Claymore was purchased cheaply and fitted out with a diving bell, winches, and a mechanical grab. This revolutionary new diving bell allowed exploration at great depths and provided a communication lifeline between the Claymore and salvage crew beneath the sea. The Bank’s involvement in the actual salvage process was logistical: arranging charter terms, ensuring that bank representatives or trusted agents could be present at port to verify transfers, and coordinating with New Zealand authorities so that customs and naval safeguards would be in place.
The seabed was swept for six weeks before the Niagara was located. Using explosives to breach the bullion room, by late 1941, divers had successfully recovered 555 of the 590 gold bars. On the water, the salvage was grim and methodical. Divers and bell‑operators placed explosive charges to open an access cut to the bullion room, using a carefully rehearsed choreography of sabotage and construction. The task of blasting egress to the bullion room took seven months. Finally, on October 13, 1941, two gold ingots were successfully recovered, and the salvage operation began in earnest.
'To state that there was equal excitement at the Commonwealth Bank when the news arrived from New Zealand by cable would, no doubt be an exaggeration, but excitement out of the ordinary there was, and it was with great satisfaction that the good news was passed on to the Bank of England.’ 4
As the gold was recovered, the Bank’s representative and assigned crewmember, V. E. Neilly, was on hand to supervise re‑packing, sealing and documentation. The gold was transported in batches back to the New Zealand port at Whangarei. Operations proceeded as weather permitted until by 7th December 1941, 555 bars, valued at £2,370,000 had been recovered. Only after all practicable steps had been taken to recover the balance of 35 bars, valued at £147,000, were salvage operations reluctantly terminated.
The Claymore delivering the gold at Whangarei dock - 1941
Order from chaos
Beyond the stories of salvage, success and heroism, the operation’s larger historical interest lies in how a central bank adapted to extraordinary circumstances: shifting from monetary policy and domestic banking into contract negotiation, legal arbitrage, and field oversight in an active theatre of war to provide order.
The Bank’s footprint throughout – commercial negotiation, legal oversight, on‑site representation – are the most notable themes. The Bank was the appointed agent of a mission that went beyond its national remit, as this salvage had global ramifications. Over 94 per cent of the gold was recovered at the greatest salvage depths ever attempted at the time, in a small, barely seaworthy ship in an area surrounded by mines. It was a triumph for the men who salvaged it and for the two banks and the British government. A cable from the Bank of England to the Bank carried the following message.
‘This enterprise has been a magnificent example of Australian determination, tenacity and inspired improvisation and I would ask you to convey to Captain Williams and his associates the thanks and congratulations of His Majesty’s Treasury and the Bank of England.’ 5
The Niagara salvage ends as a study of competence and success. The gold was returned to vaults, but more enduring was the procedural architecture the Bank built in the crisis – bureaucratic scaffolding that ensured integrity in the process of recovery. In that structure, the nation’s financial trust found its most dramatic expression: not in currency printed, but in bullion recovered and kept, measured, and accounted for amid the demands of war.
A follow up recovery operation in 1953 located and retrieved an additional 30 gold bars, bringing the total recovered to 585. Five gold bars remain unrecovered and are still thought to be lying on the bottom of the seabed.
PN-003936 Gold bars on the Claymore - Recovered from R.M.S. Niagara - 1941
MU-000632 Silver-plated dish cover from the R.M.S. Niagara - presented to G.M Shain by J.P. Williams from the salvage ship S.S Claymore - c.1940s
