The first Icelandic emigrants to Canada were members of the Church of Jesus Christ of Latter-day Saints from the Westman Islands. The more general migration followed an offer from Lord Dufferin of land in Manitoba to establish what amounted to a "free state". Due to harsh environmental and economic conditions in Iceland, including the eruption of Mount Askja, some 20,000 Icelanders left their homeland between 1870 and 1915—roughly a quarter of the population of Iceland. In 1875 a large group of Icelandic immigrants migrated from Ontario to Manitoba, leavingKinmount, Ontario, on 25 September 1875, for Gimli, Manitoba, on the shores of Lake Winnipeg. One of the main reasons for the choice of the colony site was “the abundance of fish” in Lake Winnipeg, but according to Icelandic People in Manitoba, “their first attempts at fishing on Lake Winnipeg were not successful”. Moreover, the “winter of 1875–1876 was one of the coldest on record in Manitoba, and the settlers’ clothes, including the leather shoes from Ontario, were not suitable for the rigorous weather”. However, the immigrants eventually learned to handle the ax, prepare the soil, fish through ice, and hunt game. They also learned how to drain the land, grow crops, and build better houses. These Icelandic settlers, known in their native language as Vestur-Íslendingar, called their settlement "New Iceland", and the region remains a symbolic center of the Icelandic heritage in Canada today.
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According to Statistics Canada, Manitoba is home to the largest Icelandic population outside of Iceland. There are about 26,000 people with Icelandic ancestry living in Manitoba, making up about 2% of the total population of the province. About 35% of the Icelandic Canadian population lives in Manitoba.
Currently many ethnic festivals related to New Iceland, such as Íslendingadagurinn, are held in these areas, and also the weekly newspaperLögberg-Heimskringla is printed in Winnipeg.
Gimli, Manitoba, was within the "Icelandic Reserve" granted to Icelandic settlers by the Government of Canada in 1875. Contrary to popular misconception, New Iceland was never a "republic", though the settlers did organize their own local government, which until 1880 was outside the boundaries of Manitoba. The reserve, at that time within the District of Keewatin, Northwest Territory, was always under Canadian jurisdiction, and the Icelanders were keenly aware of their new loyalties and obligations as Canadians and British subjects—as evidenced during speeches made at Gimli during the visit of Lord Dufferin, Governor General of Canada, in 1877.