Montana has a rich history of mineral exploration and mining, and much of the activity was in the vicinity of Dillon. Four major gold discoveries occurred within about 100 miles (160 km) of the town from 1852 to 1864, including the present ghost towns of Bannock and Virginia City as well as the rich lodes in Butte and Helena. All of this activity occur prior to Montana becoming a territory in 1864.

The town of Dillon was named to honor the president of the Union Pacific railroad in 1881 and the town thrived as a shipping point and agricultural center. The graphite discovery occurred just prior to statehood for the Montana Territory in 1889.

From the very start, the graphite was reported to be “as pure as the Ceylon product” and “it averages 97% pure carbon” and this has proved true today. At the time, Ceylon (now Sri Lanka) was the primary source of crystalline graphite in the world.

The first 50 tons of graphite shipped were from the Bird's Nest claim in 1902 and the bulk of remaining production of 2400 tons was from the main Ground Hog claim.

The mine production grew and waned with the first and second World Wars, as the main use at the time was refractories for steel making. Over 3,500 feet (1,070 m) of tunnel had been dug and blasted over the course of nearly 50 years before the operations were finally closed.

Ruby Graphite Holdings LLC acquired the mineral rights to the original Ground Hog claim as well as the Bird's Nest mine location and other graphite-bearing lands in 2016 through 2017.