In 1900, two prospectors, Clarence Warner and “Tarantula” Jack Smith, discovered a large outcrop of high-grade copper ore on the Bonanza ridge. Just seven years later the Alaska Syndicate and the Kennecott Copper Corporation were formed to develop the Bonanza mine and others in the area. The copper corporation was named Kennecott in an apparent misspelling of Kennicott.  Construction of the Copper River & Northwestern Railway, which cost $23 million and stretched from the mill at Kennecott to the shipping docks at Cordova, lasted from 1907-1911. By the time the Kennecott site closed, in 1938, the town had expanded to more than 100 buildings.

In 1906, as construction of the railroad first began to take shape, John Barrett homesteaded 296 acres at the mouth of McCarthy Creek, near the site of the proposed train depot. He then leased some of the land to the CR&NW Railway for the depot, and, later to incoming businessmen and women hoping to profit from the busy location. The town of McCarthy was thus born. After the railroad was completed in 1911, McCarthy became a support town for the Kennecott miners and mill workers as well as for other miners and prospectors throughout the area.  McCarthy provided gambling, pool, prostitutes, and alcohol—even during Prohibition—forbidden under the strict corporate rules of Kennecott.