Three children, Mary Green and her cousins William and Alice Constant, arrive with her Uncle Jack at Mary's father's home, Golden House, in the forests of Wales' Golden Valley, to spend their Christmas holidays. Once there they meet a 400-year-old magician who has been waiting for their help.
The evil Morden, the magician's former apprentice, sends a talking rat from the year 1590 to the present. Not only does this upset the balance of time, but the rat persuades Mary that her pregnant stepmother Phoebe is a witch who has cast a spell over her father. Meanwhile, William and Alice try to befriend Meg Lewis, an elderly animal activist, who warns the children about the valley's evil badger hunters.
Still under Morden's rat's influence, Mary hides her stepmother Phoebe's protective talisman and arranges for her to have an accident. Alice suspects that Mary is subverting their efforts to find the rat. Meg Lewis worries that badger hunters plan to dig out and torture the valley's rare golden badgers.
Trapped in the cellar by Morden's rat, Phoebe goes into labor during a blinding snowstorm. Going for help, William receives assistance from the valley's magical animals.
Morden manages to project his consciousness from the year 1590 into the present, and Mary discovers the truth about her rat friend as Morden inhabits the creature and starts to assemble an army of rat followers to attack Golden House.
Alice seeks comfort from Spot the dog, unaware that he is now inhabited by Morden. The children race to an abandoned quarry, where Tyler the Magician has challenged his evil apprentice Morden to a final battle.
Back in the 17th Century, the Magician's apprentice tries to harness the power of electricity but an explosion in his lab accidentally creates a dangerous substance called Black Gold and forces the Magician back to his own time, losing his precious gold pendulum. Meanwhile, in the present, a large corporation is planning to build a theme park close to Golden Valley, which would destroy the rare and beautiful surroundings.
William takes the Magician's lost pendulum from Mary and, enthralled by its power, helps Morden travel from the past into the present. But he is unaware that Morden has brought a piece of the Black Gold with him, or of its dangerous ""negative energy"".
As the evil Black Gold spreads its negative energy throughout Golden Valley, the children become desperate for the Magician's help. But without his magic pendulum he seems stuck in the 17th century, until he remembers that there may be another way to travel through time to the present. Mary is horrified to discover that Mark, the object of her first crush, is a descendant of Matthew Morden.
With the Magician trapped in the dream world and fading, the children's only hope is to find his lost pendulum. Meanwhile, after William reveals Meg Lewis's role in forestalling the theme park's development, Meg is in grave danger.
After Mary and Alice rescue Meg from the fire, the children desperately search for a lost deed that will prove the Mordens only own the Lewis house and not the land of the Golden Valley, but ancestor Matthew Morden thwarts their efforts using the Black Gold's evil power.
After his life is saved by William, Matthew Morden comes to realize that the children are not his enemy. But can even the combined efforts of the former adversaries reverse the Golden Valley's destruction and destroy the Black Gold forever?