The Pride of the Murray paddlewheeler has sunk less than a year after moving to its new home in the Thomson River at Longreach, Queensland.
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It's believed the incident took place at around 7am on Monday.
News that the historic paddlewheeler Pride of the Murray was sinking was passed on to police at Longreach by a kayaker out on the Thomson River on Monday morning.
In June last year, Outback Pioneers undertook the largest overland marine transport operation ever seen in Australia, moving the 98-year-old Pride of the Murray paddlewheeler through three states, from Echuca in Victoria to Longreach.
According to senior sergeant Chris Smith, the kayaker saw that the boat was low in the water the first time they paddled past and then that it had capsized to one side on the return journey.
"There's no indication that anyone was on board," he said. "At about a quarter past 7, it had sunk for reasons unknown at this stage."
All that could be seen by mid-morning was the boat's roof.
Outback Pioneers founder and director Richard Kinnon said the Longreach tourism group was in shock at the news.
"The show must go on," he said.
"We will do whatever is necessary to ensure our guests still have a fantastic cruise experience in Longreach.
"This is a setback but not the end of the story."
The restored boat was moored awaiting the start of the tourism season at the end of the month.
Longreach police are working with Maritime Safety Queensland and the Australian Maritime Safety Authority to investigate the cause, and Sgt Smith said the owners had arranged for a salvage company to look at the boat on Tuesday.
In the meantime, the area is being treated as a crime scene until a cause can be established.
Sgt Smith said that together with the local SES and community volunteers, weighted buoys were being put down around the boat, partly to contain the diesel that would be entering the water, and police would be guarding the site 24/7 until investigations had been concluded.
Outback Pioneers said it was a huge blow for Outback Pioneers in a statement.
"We hope that there will be a way to retrieve and restore this precious heritage boat by early in the season," the statement read.
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The company will be in touch with people who are already booked for the Starlight's Cruise Experience and Outback Pioneers holidays.
It says its other boats, the Thomson Belle paddlewheeler and the Thomson Princess riverboat, will still be available for the sunset cruise in the meantime.
The Pride of the Murray made news around the country last year when Richard Kinnon had her transported on an incredible overland journey from Echuca in Victoria in order to save and preserve her.