The tunnel in Labuan was once a site busy with coal mining activities for more than half a century from 1849 through 1911. This expansive network of underground tunnels is one of many important historical landmarks in Labuan. Operated by various British companies for 64 years, it was during the administration of the New Central Borneo that an 8-mile long railway track was installed from here to Victoria Port to facilitate the export of coal, resulting in a flourishing coal mining operation here. However, an unfortunate string of mining accidents led to the closure of the mine in 1911.

Today, remains in the area include pits and tunnels, old bricks and pieces of rail tracks and rusted cables strewn on the ground. Visitors can enter a low tunnel with the help of a short rope and emerge from the top, although this should only be attempted with great caution. Across the road next to the Chimney, 10-foot wide vertical well, measuring some 100 feet deep. Entrances to more tunnels, which are yet to be explored, are also found at the bottom of this well.