When the Frisco Lumber Company had cut out two miles away at Sour Lake, one of its owners, A. C. Ford, joined forces with the prominent Thompson lumber family and organized Thompson-Ford to locate timber and profit. The new mill was located two miles south of Sour Lake at the juncture of the St. Louis & San Francisco and the Southern Pacific railroads. The mill town was named Grayburg, according to the American Lumberman, not only because "the name is euphonious and easy to remember," but "chiefly because all of the buildings in the town will be painted gray." Operations began in February 1907, in a double band mill in a 56-ft by 174-ft building. Steam power was provided by five boilers (Casey-Hedges 72-inch by 18-ft long), each having separate 36-inch by 96-ft high stacks. A Stanwood and Gamble 18-inch by 24-inch 500-horsepower twin engine powered the machinery. The log slide from pond to mill was 300 feet long. Band saws were 14 inch Twin Diamond Iron Works with Simonds blades and Allis-Chalmers carriages. Daily cutting capacity was 500,000 feet in a day and night run for both sawmill and planing mill. Five dry kilns were provided for aging the lumber. Hoses, pumps, pipes, and four "watchmen" provided fire protection. A 72 foot by 140 foot building housed the planing mill with two boilers and stacks three feet wide and 100 feet high. The company tram road was twenty miles long. Seventy-five percent of the cut was board stock.
The company houses were painted gray, thus the name of the town. 450 men were employed in the mill and logging.
The mill employed 259 individuals in 1908. The Sabine Lumber Company controlled the operation in 1928. Although still listed in a 1928 industrial journal, the mill was reported prematurely in 1925, by The Gulf Coast Lumberman, to being cut out and dismantled within two weeks. The Gulf Coast Lumberman noted the mill would close in November 1928.