Three survivors who made their way to an island after a fishing trawler capsized lit fires to attract attention.
The three were rescued from Women's Island about 15km off Stewart Island in Foveaux Strait last night but six others on a family muttonbirding expedition are feared dead.
This afternoon searchers recovered a third body from the chilly waters.
A small surface oil slick has also been found. A police dive team was being brought in from Wellington, Maritime New Zealand said.
Six members of the Topi family, led by 78-year-old Leslie Christian Topi, known as Peter, were returning from muttonbirding on the Titi Islands on the 17 metre Kotuku when it rolled about 2.30pm near Women's Island.
Peter's 46-year-old son, Paul Maurice, and grandson Dylan James Topi, 16, were found on Women's Island and stayed at Stewart Island last night before returning home today.
Kotuku skipper John Edward Edminstin, 56, was also found on the island and was flown to Southland Hospital last night, said acting area commander Inspector Barry Taylor, of the Invercargill police.
Still missing is Peter, his daughter Tania Marie Topi, 41, mother of Dylan and sister of Paul; Tania's son, Sailor Roy Trow-Topi, 9; Paul's son, Shain Jack Topi-Tairi, 9; and Clinton Allan Woods, 34, and Ian James Hayward, 52.
The Kotuku had rolled about 2.30pm but police were not alerted to the tragedy until about 6.20pm after fires and people were spotted on Women's Island which was normally uninhabited, and a vessel in the area found some debris floating in the area, he said.
Police did not believe the boat had hit rocks and were unsure why it had rolled. Mr Taylor was not aware of any mayday call.
The three survivors - two in a hut and one on the foreshore of the island - were rescued by helicopter.
"Clearly the events of just under the last 24 hours have been quite traumatic for everybody involved, including the Bluff community.
"It hits one particular family in what can only be said is tragic circumstances.
"It's a shame that such tragic events can only pull communities together and our thoughts must be with not only the Topi family and other families involved, but with the entire Bluff community."
Life expectancy in the 12degC chilly waters of Foveaux Strait was about five hours so unless the missing people had been able to swim to an island, or had some flotation device or were on the boat hull if it had not sunk, it was unlikely they were alive.
"The longer this search extends, the less likelihood there is of finding survivors," Mr Taylor said.
A Stewart Island resident -- who didn't wish to be named -- said the Topi family were very well know locally as they had lived on Stewart Island for a time.
They had gone out earlier in the day to collect muttonbirds.
It was the end of the muttonbird season, and it was common for entire families, including children, to go muttonbirding on the islands in the strait.
She said the family made the same journey every year.
They were returning on the vessel Kotuku, when it went down about 2pm
She said the locals "hadn't a clue what happened to the boat".
"There was no calls given. We just heard reports that a boat had gone down, realised that something had gone dreadfully wrong and a search was initiated from that."
About 6.20 pm, at least 16 boats and two helicopters with night vision were employed in a search.
"They called a halt for a while, but they were all back out there this morning."
A spokesman for Maritime New Zealand said about 20 vessels, three helicopters and a fixed wing aircraft were searching the area today.
Mr Taylor said teams of search and rescue personnel were also being flown to the nearby islands to carry out ground searches today.
- NZPA
Fires drew rescuers to shipwrecked trio
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