"A round unexpectedly exploded. It was very sudden and comes as an absolute shock," Mr Freeman said.
"He was no stranger to dealing with firearms and took all the precautions he could. We are at a loss to explain how this happened."
Mr Kelly, a successful dairy farmer, was a volunteer at the Dargaville Museum, involved with the RSA, and a member of many committees.
"He was one of those fellows if there was a community project going, he would get involved in it," Mr Freeman said. "He was always looking to help his community in general to prosper. He was your typical farmer and had a wealth of knowledge. He could fix your tractor or weld a gate together. He was a jack of all trades."
Mr Freeman would not comment further on what the weapon was or what it was used for.
The Northern Advocate understands the firearm was not a military style weapon.
Northland police spokeswoman Sarah Kennett said firearm was cannon-like, with a 40mm diameter. She said the case had been referred to the coroner.
Others in the Kaipara community were also mourning the loss of "one of the good guys". A fellow member of the Dargaville Pistol Club, Mike Andrews, said he had lost one of his best friends, whom he had known for more than 20 years.
They had travelled to many shooting competitions in Northland and further afield over the years.
"He was a collector of firearms and was always very safe around the range, very safety conscious. This is a total shock."
Diane Black, who belonged to the Dargaville Pistol Club and the Kaipara Community Centre along with Mr Kelly, said his death was "a huge loss".
Mrs Black said Mr Kelly took people through their firearms licences and also trained cadets in shooting through the Air Training Corps. She said he had plenty of firearms.
"Particularly older firearms. If someone had a firearm with a piece broken, Derek had lots and lots of spare parts."
Dargaville Museum manager Pene McKenzie said Mr Kelly was a former committee member and had been the driving force behind lighting the Rainbow Warrior masts on the museum grounds.
"He sorted out the sponsorship and instigated the rigging and light, and maintained it over the years."
Mr Kelly was a frequent visitor to the museum.
"He would give us good advice and tell us a few tall stories. He will be sorely missed," Ms McKenzie said.