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The townsite of Collie is located in the south west agricultural region, 202 kilometres south southeast of Perth, and about 50 kilometres east of Bunbury. It is situated on the Collie River after which it is named. The river, which rises in the Darling Range and flows into Leschenault Estuary near Bunbury, is named after Dr Alexander Collie. Dr Collie, a Royal Navy surgeon, and Lt. William Preston of H.M.S. Sulphur, explored this country and discovered the river in 1829, and Captain James Stirling, the Lieutenant Governor, named it in Collie's honour. Collie was appointed the first Resident Magistrate at Albany in 1831, was later appointed Colonial Surgeon, and died at Albany in 1836.
Collie is a coal mining town, coal having been discovered near here by George March, a shepherd, in the early 1880s. The coalfields were developed in the late 1890s, and land set aside for a townsite. The name Collie was generally used from the beginning, and when lots were surveyed and the townsite gazetted in December 1897, it was named Collie. However, the selection of name was immediately a problem, as there was already a railway station near Roelands named Collie. Collie townsite was therefore renamed Colliefields in January 1898. The Colliefields Progress Committee immediately protested at this decision, and after further consideration the Collie railway station was renamed Roelands and Colliefields townsite renamed Collie in 1899.