The TARDIS lands on the trading colony Iceworld, on the dark side of the planet Svartos. The Doctor and Mel (Bonnie Langford) run into con-man Sabalom Glitz (Tony Selby), who is working off a debt owed to the crime-lord Kane (Edward Peel), who sleeps in a freezer and whose touch is deadly. The plan is to explore the depths of the planet for a treasure which is said to be guarded by a dragon. Glitz has a map given to him by Kane, who has promised to return Glitz’s ship, Nosferatu, and wipe out his debts.
The Doctor’s offer of help is accepted, but Glitz thinks the expedition is too dangerous for Mel, who waits at a local diner. There, she meets Ace (Sophie Aldred), a young woman from 20th Century Earth. She was sent forward in time when an experiment with her invention Nitro-9 exploded and caused a time-storm. Ace is afraid of nothing and convinces Mel to join her in following the Doctor and Glitz.
The men follow the map, not knowing that Kane has implanted a tracker and a listening device in it. Kane employs an army of debtors whose memories have been wiped and were turned into frozen zombie henchmen. Several of these are following the pair to grab the treasure when it is found. The dragon turns out to be a biomechanoid that shoots lasers from its eyes.
When Mel and Ace arrive, pursued by Kane’s men, the dragon protects the women. The dragon leads the four to a control room and plays a holographic message informing them that Kane is part of the Kane-Xana gang from Proamon. Xana, Kane’s lover, killed herself when trapped by authorities, and Kane was exiled to Svartos. Apparently, the Iceworld spaceport is really a giant spaceship, with its power-source in the dragon’s head. Kane has been trapped on this planet for thousands of years and needs the dragon’s head to escape.
Kane sends more of his forces to seize the dragon’s head, which causes chaos in the spaceport. The Nosferatu is destroyed along with the passengers trying to use it to flee the chaos. Kane’s men decapitate the dragon, though they are killed in the process by its heat, and Kane orders the Doctor’s group to bring him the head. The Doctor does this and Kane uses the head to start Iceworld’s engines. Kane tries to set a course home to Proamon, but the Doctor informs him that the planet was destroyed a thousand years ago. Kane commits suicide by exposing himself to the brilliant light of a nearby star. Order is restored and Glitz renames the ship Nosferatu II. Mel decides to stay with him, and the Doctor offers to take Ace home to Earth.
The story was voted best of the season by the Doctor Who Appreciation Society, despite its problems, because the entire cast seemed to take their parts seriously. In a well-known scene, however, the Doctor lowers himself over a guard-rail and dangles over an abyss from his umbrella—a literal cliff-hanger. In the script, he did this because the passage was a dead end, but it was filmed in such a way that there seemed no purpose in it. When he dies, Kane’s face melts like that of Gestapo agent Toht in Raiders of the Lost Ark, though somewhat less horrific for the Doctor Who audience because they avoided the colour red. Ronald Lacey, who played Toht in the Indiana Jones movie, was considered for the role of Kane, but was unavailable.
The Iceworld cafeteria was inspired by the Mos Eisley Cantina in Star Wars. Kane was originally called Hess, but the name was changed because Rudolf Hess was in the news, so he was named after Charles Foster Kane from Citizen Kane. Ace’s real name is Dorothy McShane. The Doctor’s farewell speech to Mel served as his audition for the role of the Doctor. Many wonder why Mel decided to go off with Glitz. He was no longer the loveable rogue of his earlier appearances but had become a bit more like a hardened criminal. Still, they had sat side-by-side in the trial of the previous Doctor and may have become friends.