Set in a small Australian rural town, the narrative begins with the Thompson children--Helen, John, and Snow--riding their horses home from school with Michael, their English friend, and Neza, the son of the family's Aboriginal stockman. Following a path that they have been forbidden to take, the children meet two strangers who give them money and make them promise to keep quiet about their presence. While talking to the men, the Thompson children innocently mention Lucy, their prize mare, and her foal, not knowing that the two men, Long Bill and Jim, are horse thieves.
When the horses go missing the next day, the children realise who stole them and that they were responsible for this happening. Resolving to get Lucy and her foal back, the children tell their parents that they are going camping but instead head off with Michael and Neza to track down the villains (who by now have been joined by another man named Blue). They eventually recover the horses and steal the men's boots and blankets, while Neza spears their water bag. Although the children's escape is thwarted when the villains trap them in an old ghost town, Mr Thompson and the local police turn up just in time and arrest the thieves. The children then return home for a much-anticipated Christmas dinner.
