History of the Diamond.
When the Esquimalt and Nanaimo Railway (the E & N) was completed in 1886, it ran close to the top of Oyster Harbour and through what was to become Ladysmith. In 1898, a coal mine was opened at Extension, 11 kilometres to the northwest; some miners lived there, but most lived at Oyster Harbour. A railway line was built between the mine and the coal wharf at Oyster Harbour and the trains carried miners to the mine in the morning and back in the afternoon as well as hauling coal during the day. The two railway lines crossed over on the northwest edge of Oyster Harbour so it was necessary to lay a diamond-shaped section of rail with trains being controlled from a signal tower nearby (the switch levers are presently situated at the junction of First Avenue and Warren St. being part of the Ladysmith Heritage Walk); thus the area became known as the Diamond.
Information provided by :https://www.ladysmithchronicle.com/community/history-of-the-diamond/