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Kenora's future site was in the territory of the Ojibway when the first European, Jacques De Noyon, sighted Lake of the Woods in 1688. Pierre La Vérendrye established a secure French trading post, Fort St. Charles, to the south of present-day Kenora near the current Canada/U.S. border in 1732, and France maintained the post until 1763 when it lost the territory to the British in the Seven Years' War — until then, it was the most northwesterly settlement of New France. In 1836 the Hudson's Bay Company established a post on Old Fort Island, and in 1861, the Company opened a post on the mainland at Kenora's current location.
In 1878, the company surveyed lots for the permanent settlement of Rat Portage ("portage to the country of the muskrat") — the community kept that name until 1905, when it was renamed to Kenora. The name, "Kenora," was coined by combining the first two letters of Keewatin, Norman (two nearby communities) and Rat Portage.
Kenora was once claimed as part of the Province of Manitoba, and there are early references to Rat Portage, Manitoba. There was a long lasting argument between the two provinces known as the Ontario-Manitoba boundary dispute. Each province claimed the town as part of their territory and the dispute lasted from 1870-1884. Although Ottawa had ruled the town part of Manitoba in 1881, the issue was finally taken up with the Privy Council of England whom eventually decided in Ontario's favour. Kenora officially became part of the province of Ontario in 1889. Boundaries were drawn up for the provinces and the Northwest Angle on Lake of the Woods which definitively drew the borders between Ontario, Manitoba, Canada, and Minnesota, U.S.A.
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