Archaeologists discover the final resting place of outlaw Ned Kelly

Ned Kelly, the 19th-century bushranger who eluded police for two years before being caught in a hail of bullets, has been tracked down again. His bones, which were feared lost, are believed to be among human remains dug up at a former prison site.

Kelly, a legendary figure in Australian folklore, was hanged at the Old Melbourne Gaol in 1880. When the prison closed in 1929, his and other remains were exhumed and reburied in a mass grave in the grounds of another Melbourne jail, Pentridge. Pentridge was closed by the Victorian government in 1997 and the site sold to developers. But archaeological investigations carried out by the state conservation body, Heritage Victoria, found no trace of the 32 executed prisoners. Archaeologists said last year that they believed the bones were removed and may have been dumped in a quarry when drainage works were carried out in the mid-20th century.

Recently, though, they stumbled across an old Department of Justice document that appeared to show the location of other mass graves. Digging in a remote area of the former prison complex, they found rows of coffins containing the remains of 32 bodies . Kelly's bones have not yet been identified but are almost certain to be among them.

The quest for his last resting place has been closely followed by Australians, who remain fascinated by a man regarded by some as a common horse thief and murderer but by others as a champion of the oppressed underclass in a harsh colonial society.

Kelly and his younger brother, Dan, who were wanted for horse stealing, vanished into the bush in rural Victoria in 1878. They came from a struggling family. Their father, who was an Irish convict, had died young. Their mother was jailed on a trumped-up charge of attempting to murder a policeman.

The Kelly Gang – the brothers, joined by two friends, Joe Byrne and Steve Hart – endeared themselves to the locals by robbing banks and tearing up mortgage papers, then distributing money, Robin Hood-style, to impoverished families. They also declared an independent Republic of North-East Victoria. Police called in five Aboriginal trackers, employed for their intimate knowledge of the rural landscape. The fugitives, ambushed in a place called Stringybark Creek, shot dead three policemen.

Their flight ended in the township of Glenrowan, where police laid siege to the hotel in which they were hiding. Kelly – Australia's most wanted man during his two years on the run – was the only member of the gang to survive a day-long gun battle. In a defiant last stand, he walked towards police with guns blazing, dressed in homemade armour hammered out of plough blades.

Kelly, who was shot more than 20 times in the legs, arms and groin before being arrested, was subsequently hanged for murder, despite a petition with 32,000 signatures requesting his release. He was just short of his 26th birthday.

Jeremy Smith, the senior archaeologist with Heritage Victoria, described the hunt for his final burial site as "a great archaeological detective story that has taken two years to get to the bottom of".

"It is the most exciting archaeological find I have ever been involved in," he said. "We still have some testing to do, but it is pretty clear we have found them [the remains]."

The bodies that have been found are incomplete. Mr Smith said it might be difficult to identify individuals because the remains, apart from being decomposed, had been mixed up together. "Ned Kelly's remains were ... not handled with a great degree of care," he said. "It's also possible that his skull and other body parts were stolen immediately following his execution in 1880."

A wrist injury that Kelly is known to have received during one shoot-out may help scientists to identify his bones. The Victorian planning minister, Justin Madden, said yesterday the remains would be analysed at the state's Institute of Forensic Medicine.

"Although it may not be possible to conclusively match remains to individual prisoners, we hope the analysis will provide a better understanding of the history of the burials following the Old Melbourne Gaol closure in the 1920s," he said.

Among the other sets of remains are believed to be those of Frederick Deeming, one of Australia's most notorious serial killers, who murdered a succession of wives and children in the 19th century.

Kelly's exploits have been celebrated in songs, poems and plays. They have also inspired three films, beginning with the 1906 movie, The Story of the Kelly Gang.

The scene of Kelly's last stand has been designated a national heritage site. Now it seems that his grave may become another place of pilgrimage for tourists.

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