The line was constructed and operated by the Commonwealth Oil Corporation for their Newnes Oil Shale mine. Surveying and construction was overseen by Henry Deane. The line opened in 1907 and closed in 1932. It was primarily intended to carry goods to and from the mine but also provided passenger services.
The New South Wales Division of Australian Railway Historical Society published The Shale Railways of New South Wales in 1974 which includes a detailed history of this line.
Allan Watson, the Lessee of the old Newnes Hotel, has a comprehensive website here.
The steep 1 in 25 (4%) gradients along the descent towards Newnes required a different type of steam locomotive. 4 Shay locomotives were imported from the Lima Locomotive Works in the USA. Although rather slow, their unique build which uses crankshafts to propel the wheels made them very suitable, and if a train had to stop on a steep uphill grade, the train could easily start again and keep moving.