The original idea for constructing this railway came in 1872 when the Thunder Bay Silver Mines Railway was incorporated. Silver had been discovered southwest of the city, and promoters were anxious to tap this resource, as well as providing a rail connection to Duluth, Minnesota. Nothing was done however, and the charter lapsed. Another attempt to revive the idea was made in 1881, but the application was thrown out of Parliament. Politicians had argued that the plan to build so close to the boundary violated their agreement with the Canadian Pacific Railway that, "no railway be constructed within 15 miles of the border." Undaunted, the promoters tried again one year later. Finally, in February 1883, a Provincial charter was granted to the Thunder Bay Colonization Railway (TBCR).

The 2-6-0 Mogul #108 heads up a mixed train of the Canadian Northern Railway at Mackies Siding in 1918.
A photograph of an excursion train on the P.A.D & W in 1891, probably near the end of track at Sand Lake. This particular event, complete with dignitaries from both Port Arthur and Fort William, was recorded in next issue of the Fort William Journal, one of the many local papers.

Now that the promoters of the railway (which included many of Port Arthur's prominent citizens such as Thomas Marks, D.F. Burk and James Conmee, M.P.P) had their charter, their efforts were buoyed by further good news. American interests had begun construction on the Duluth and Iron Range Railway north towards the boundary, which offered to provide the sought after link with Duluth. As well, a large iron deposit had been discovered just across the border at Gunflint Lake, which was part of the now famous Vermilion and Mesabi iron ranges. The promoters however, could not afford to build, having only received a subsidy from the Dominion Government.

In 1887, the corporate name was changed to the Port Arthur, Duluth and Western Railway (P.A.D & W) by Provincial Statute. With subsidies later granted from the Dominion, Provincial and Municipal Governments, construction was commenced in the fall of 1889. By December 1892, the railway had reached its Canadian terminus at Gunflint Lake. A six-mile branch, known as the P.A.D & W of Minnesota, was constructed across the border to the Gunflint Iron Mine. However, very little iron was shipped by the railway and the mine closed. Attempts to construct the 50 remaining miles to link with the Duluth & Iron Range were frustrated by rough terrain and lack of capital.

The railway was officially opened on June 1, 1893. The railway wound its way 86 miles from Port Arthur (now Thunder Bay) to Gunflint Lake. After leaving Port Arthur, it crossed the adjoining city of Fort William and along the Kaministiquia River to Stanley. It crossed the river on a large trestle and followed the Whitefish River Valley for some distance. Passing Whitefish, Sand and Iron Range Lakes, the P.A.D & W turned southwest to North Lake at mile 70. From there it followed the chain of boundary lakes to Gunflint Narrows and the iron mine.

From the date of its opening, the railway was in immediate trouble. In 1892, the silver market collapsed and the numerous silver mines along the line closed. Its perpetual bad luck and constant lateness would lead noted author James Oliver Curwood to dub the railway, "Poverty, Agony, Distress and Want." By 1898, the railway was bankrupt and it was purchased by Canadian Northern Railway (C.N.o.R) for $250,000. Its owners, Donald Mann and William Mackenzie, wanted the P.A.D & W's 19 miles of road from Stanley to Port Arthur for their planned Ontario and Rainy River Railway. Under Canadian Northern, the "Duluth Extension" flourished. Many of the silver mines re-opened, and passenger traffic was up. However, the section of line between North Lake and Gunflint Narrows was abandoned in 1902, but it was quickly leased by the Pigeon River Lumber Company which was engaged in extensive logging operations in the area. However, a large forest fire would destroy a one-thousand foot trestle on North Lake in 1909, which severed the line to Gunflint and to the US.

In 1915, all the rails west of North Lake were removed sold for scrap and apparently used in the war effort. In 1920, the troubled Canadian Northern became nationalized under the name Canadian National Railways (C.N.R). Now known as the CNR-North Lake Sub-Division, the "PeeDee" (as it became known) was in its twilight. In 1923, a forest fire destroyed a large trestle west of Mackies, severing the line to North Lake. With next to no business on that section of line, the loss of the trestle gave CN the perfect excuse to abandon that section of line. The rails were left in place and not removed until 1937. In March 1938, Canadian National gave the order to halt operations. The railway was losing money, which was compounded by the fact that many sections of line had deteriorated badly and needed to be repaired. In October of that year, CN formally abandoned the line and the rails were removed over the next year.