Following the war some people returned to the Head of the Lakes while others did not. Even Reverend Ely had given up on Oneota. In 1865 Joshua Culver returned as a full colonel and built a sawmill on Minnesota Point. There were then just 294 people in all of St. Louis County—56 in Fond du Lac, 112 in Oneota, and 126 in Duluth.
Duluth enjoyed a brief boost in activity in what proved to be a false gold rush at Lake Vermilion ninety miles north of Duluth. Prospectors purchased gear, food, and lodging in Duluth before departing on the Vermilion Trail, also built by George Stuntz. The road began near the Luce-Busch brewery and followed an Ojibwe path north to Lake Vermillion, but the gold deposits never materialized.
Stuntz used his time near the lake to look for a less precious metal. North Albert Posey, a local blacksmith of Ojibwe descent, had shown Stuntz a chunk of iron ore two Ojibwe told him they had found near Lake Vermilion. While others looked for gold, Stuntz found iron. But when he returned to Duluth he had to put the idea of iron mining aside, as his friends needed his help luring a railroad.
St. Paul’s William Banning chased a much more prudent dream than gold and copper mining. He and his fellow investors wanted to build a railroad from the Mississippi River to Lake Superior. Their Lake Superior & Mississippi Railroad (LS&M) would not only link two great waterways, becoming a very busy “portage” railway, but it would also connect to the eastern terminus of the Northern Pacific Railroad (NP), recently authorized to run from the Head of the Lakes to the Pacific Ocean at Puget Sound. But Banning and his friends ran out of money after building just a few miles of track.
They turned to Philadelphia financier Jay Cooke. Cooke’s banking house had financed much of the Union Army’s effort during the Civil War, selling bonds to wealthy Europeans. Cooke, who was also being courted by the Northern Pacific’s investors, came to Banning’s rescue, providing financing that secured the LS&M’s future. But the railroad’s northern terminus hadn’t been determined.
Both Superior and Duluth wanted the railroad, as it would surely make its host city a great shipping center, eclipsing Chicago. Superiorites assumed their town was a lock. They had financial backing from the East and geography was on their side. The Superior Entry between Minnesota and Wisconsin Points—the conduit through which shipping traffic flowed between the lake and the St. Louis river—was directly adjacent to Superior and seven miles from Duluth’s center. And it would be much easier to build a railroad on Superior’s flat, marshy land than on the narrow pile of rocks across the bay. Banning warned Duluthians in an 1867 letter that Superior’s backers had been “circulating rumors that it is not possible to find room on the North Shore either on the lake or bays, to build a railroad, lay out and build a town, or do any kind of commercial business.”
Cooke visited the Head of the Lakes in June 1868, according to the St. Paul Daily Press, “on business connected with the eastern terminus” of the LS&M and to see for himself timber property he had purchased along the lower St. Louis, Nemadji, and Cloquet Rivers. It included land along the St. Louis River dalles, which he envisioned powering a hydroelectric dam above Fond du Lac. During his trip Cooke met with Luce, Culver, and other Duluth leaders, and even got in a little fishing on the Lester River, but reportedly “never got a bite.”
Since Cook held the LS&M’s purse strings, the townsite’s leaders needed to persuade him to terminate the railroad in Duluth. Culver and company apparently failed to convince Cooke to choose Duluth during his visit—and that’s where Stuntz came in. Stuntz’s old boss, former Surveyor General of the United States George Sargent, had spent the war selling bonds for Cooke. Sargent had sent Stuntz to the Head of the Lakes in 1852, and four years later told his fellow Bostonians that “the undeveloped wealth of the Lake Superior region offers reward beyond calculation to those who have the energy and enterprise to secure it.” With an introduction from Sargent, Stuntz would try to convince Cooke to bring the LS&M to Duluth. So the surveyor traveled east in January 1869. Sargent not only made the introduction but also purchased twenty lots in Duluth, sight unseen.
In Philadelphia, Stuntz assured Cooke the land along his railroads could be sold to farmers at a healthy profit. He also mentioned northeastern Minnesota’s potential mineral and timber resources and Sargent’s real-estate investment. Shortly after Stuntz’s visit, Cooke selected Duluth as the LS&M’s northern terminus. Stuntz’s visit also ultimately helped convinced Cooke to invest in the NP, construction of which would begin near today’s Carlton, Minnesota, heading west. There it would connect with the LS&M and run to Lake Superior, making Duluth the NP’s eastern terminus.
Cooke’s choice is arguably the most significant moment in Duluth’s history. Van Brunt later described the transformation that followed as nothing short of miraculous: “A glorious resurrection took place; the lifeless corpse [of Duluth], touched by the wand of Jay Cooke, sprang full-armed from the tomb.” Cooke’s investment would not only bring the Minnesota townsite back to life but also forever tip the scales in Duluth’s favor over Superior, leading to decades of conflict between the two communities.