George is recounting a story involving Old Ned to Sammy. It has come to his mind because it involves fishing, which is what George and Sammy are doing. It is either not a very good story because George hasn't told Sammy sooner or George has only recently heard about it. It might be that he heard it a week or so ago but decided to hold on to it until his and Sammy's pre-planned fishing trip, thinking it would be an excellent situation to bring up Old Ned's story as it might not have the desired effect if he told it in the pub.
Sammy is shocked by the first part of the story. He could either be shocked because he is concerned for the well-being of Old Ned or he is worried that Old Ned was fishing near to where they are now and he is concerned for his own well-being. Is it likely that a mine would be caught up river in South West London? It could be that this mine was left over from World War II which means it may be ineffective by this time as a Stonefish mine has a life of about 20 years. Unless this mine was laid in the late 60s, then Sammy is safe.
After George delivers the killer line in his story, both he and Sammy smirk. Sammy could be smiling because that sounds exactly like something Old Ned would say. However, Sammy could be smiling because he now realises that George's story was merely the means to a punchline. If that is the case, how does Old Ned feel about being used as a pawn for George's amusement? There is of course an argument that there is never an Old Ned and this is just the name George uses in stories when he's trying out a new joke. Sammy was playing along all the time. In fact these fishing trips are a constant back and forth of 'Old Ned' jokes. You really have to be there.