The town's proximity to Burra meant that in the 1840s prospectors entered the area searching for possible copper mining sites. They were partially successful. The 'Wheal Sarah' mine was established and worked for a number of years.
The town of Spalding was founded by William Edward Lunn in 1875-76 with the District Council being proclaimed in 1885. It is likely that the town was named after Spalding in Lincolnshire which happened to be the birthplace of William Lunn.