An Auckland couple were lucky to escape from their luxury launch when it burst into flames on Wednesday night.
Eyewitness Morris Watson said the boat owner noticed a burning smell at about 9.30 pm.
He opened a hatch in the cockpit housing the batteries only to find the area engulfed in flames.
Watson said a couple named Kevan and Marion were on the boat, a Riviera 4700 Sedan anchored in Woolshed Bay off the west coast of the Coromandel Peninsula.
"He slammed the hatch shut and yelled at Marion to get in the dinghy with their dog Sapphie."
"They were extremely fortunate in that had it happened 15 minutes later, they would have been asleep and wouldn't have been able to escape."
The boat sank and the couple lost many possessions.
"The vessel burned for an hour-and-a-half and then sank. Having lost everything on board they are lucky to have escaped with their lives," Watson added.
Watson, who took the couple to Half Moon Bay in Auckland on Thursday, and the remains of the burn-out boat were on the seabed in Woolshed Bay, Whanganui Island.
He said the harbourmaster marked the sunken boat with a buoy and the buoy would stay in place until a salvage team with heavy lifting equipment could remove the boat.
Watson said tests earlier today tests had shown no signs of diesel contamination,
However, this afternoon Waikato Regional Council confirmation staff had been sent to the bay to contain a leak after a diesel slick following the vessel's sinking
The council said it was understood 2000 litres of diesel was on board the 47-foot fibreglass launch when it caught fire and sunk.
A regional council maritime officer had been at the scene since early this morning and the slick was first noticed early this afternoon and an oil spill response initiated.
Regional On-Scene Commander Richard Barnett said the maritime officer had reported that the diesel slick was about 5km long and 300m wide.
Barnett said aquaculture farms operating in the area had been contacted by the council this afternoon.
"The good news is that the slick is currently tracking away from the mussel and oyster farms and out to sea with the wind," he said.
"We are continuing to closely monitor the weather conditions, including the wind directions, which are favourable at this time.
"We are also liaising with the owner of the launch, that is currently resting on the bottom of the ocean," Barnett said.
Police confirmed a boat fire was reported in Woolshed Bay and two people on board managed to get on to another vessel uninjured.
Watson said the couple wanted to thank all the boaties in the bay who came to help.
"It's knocked them around a bit, but they were lucky there were plenty of people there to help."
"It's a very fortunate story that ended well. It could have been a disaster story very easily," Watson added.