The Sluice is used to filter out sand or gravel to get ore nuggets and gems. The nuggets it produces are derived from the ore blocks in surrounding chunks, whereas the gems it produces are random.
1. Find shoreline and dig out a trench a few blocks to create flowing water.
2. Dig your flowing water trench 1 block down and 2 blocks long
3. Place the sluice so that the water flows down into the sluice.
4. Drop sand or gravel into the sluice and wait.