News from a Defence source of the sonar blip emerged as descendants on board the HMAS Yarra joined a dawn wreath-laying service on Simpson Harbour off Rabaul in East New Britain province. They tossed a wreath and local Birds of Paradise flowers over the stern of the ship.

They had travelled to this remote part of Papua New Guinea hoping, 100 years almost to the day since Australia suffered its first naval loss of the war, for some answers.

Overlooked by the Pacific volcano Tavurvur, which erupted only two weeks ago, the relatives hope that Australia's greatest wartime naval mystery may finally be solved.

The Defence source said the find was in the search area off Duke of York island.

"We need to get more detailed analysis. That is what we are doing at the moment," the source said.

"Different sources, not only military, need to see if it fits the submarine's profile. We have found items here before.

"If you look on the chart it is one of the most wreck-strewn areas in the region."

The loss of the British-built AE1 on September 14, 1914, took place after the Australian fleet sailed to New Guinea to capture the German colony on Britain's behalf. The objective, achieved with the loss of seven lives, was to take out wireless stations providing key communications for the German Pacific Fleet.

The AE1 and HMAS Parramatta were on patrol. The Parramatta returned to harbour. The AE1 did not. It was never seen again.

Lieutenant Commander Brendan O'Hara, Commanding Officer of HMAS Yarra, said: "We honour the memory of those men today. The tranquillity of this beautiful setting gives us time to reflect.

"Here on Simpson Harbour overlooking Rabaul with Mt Tavurvur to our backs we look out to the distance to the place where, 100 years ago, HMAS AE1 put to sea and then vanished without a trace.

"I pray they have found peace beneath the waters, these men who remain on an eternal patrol."

Robyn Rosenstrauss, whose great-uncle James Fettes, of Balmain, was on the submarine, struggled to control her emotion as the wreath was dropped to the waves.

"I grew up in the same house as he did," she said.

"I do have a real connection to him, I still have his old sea chest with his name on it.

"I often ask people about the AE1 and I am surprised that they don't know about it.

"They also don't know that the first fatalities of World War I were in Papua New Guinea, not Gallipoli.

"I didn't think I would get emotional but I am quite teary. I feel I have done something for him, all of them. There were 35 and some of them were married."

David Messenger, attending in memory of his grandfather's brother, John Messenger, of Ballarat, said he was very positive about the work the navy was doing to find the vessel.

As well as a flower, he also dropped overboard a stone from Cockatoo Island, the last place on land where his relative prepared the submarine for sea.

"Hopefully they will find the submarine," he said.

"We will never know what happened unless they dive on it but I think it should remain where it is and untouched." 

Military historian and author Dr Kathryn Spurling, who is in Rabaul, told Fairfax Media she believed the submarine stumbled across a hidden German boat.

"It didn't even have to be an armed German boat," she said.

"The submarine was so small it would only have to be rammed by the German boat to go over topsy-turvy and it would go straight down.

"Because there was no wreckage and no oil slick it could not have been the case of carving itself open on a coral reef.

"The only way the submarine could protect itself or attack the German boat was to submerge and as a submarine just goes beneath the water it is incredibly vulnerable and unstable, especially if you have a bad engine, which they did.

"I think that is the most logical way it was lost.

"If they find it we all have our answers. It will be amazing; we'll know why it went down. Was it the first military unit in World War I destroyed in enemy action? That puts an entirely different perspective on our military history."

She said the Australian government had to take responsibility in concert with the Papua New Guinea government for preserving the wreck if found.

"It has to be declared a war grave and it must be off-limits to everybody."

A newly placed bronze memorial in the Bita Paka War Cemetery inland from Rabaul gives recognition to the lost submariners while their families await answers.

The memorial states: "As the first Australian ship lost in war, AE1 remains a symbol of sacrifice and holds a proud place in the nation's naval history." 

The Sydney Morning Herald.