Lithgow's Zig Zag Railway has been left with a damage bill as high as $4 million after devastating bushfires ripped through the Blue Mountains on Thursday.

Properties in the area remain under threat, with residents of Bell, Dargan Berambing and Bilpin told to take shelter and stay put.

Director Alexander Robinson-Mills says trains, carriages and equipment have been completely destroyed.

He says a caretaker living on the railway site lost nearly everything she owned.

"She was looking after the property for us, and she was doing a really wonderful job. She was planning to go overseas next week," he said.

"All of her property was destroyed. All she has is what she's got on her now. She was unable to get anything out at the time."

Mr Robinson-Mills says he expects the damage bill will run into the millions.

"We do have some insurance for the things that were destroyed. We are unable to make exact estimates, but we are estimating between $3 million and $4 million," he said.

This rail motor was completely gutted by fire. ( Supplied: Zig Zag Railway )

The railway, which is run by a not-for-profit cooperative, runs trains on the original Zig Zag railway, which was built in 1869.

Safety and financial issues could have seen the railway close permanently last year.

The site was on the verge of restarting passenger services when the fire hit.

Mr Robinson-Mills says he is hopeful the railway will be able to rebuild.

"We've been ensuring the site is safe, especially from electrical hazards. We've contacted the police and the insurance assessor. We'll be dealing with them as we move forward," he said.