This was referring to the large amounts of buffalo bones on the banks of the Wascana Creek. In fact, Regina's first export business was that of exporting bleached bones to eastern Canada to be used as fertilizer.
Then in 1882 Princess Louise, Duchess of Argyll, and her husband, the Duke of Argyll, who was then the Governor General of Canada, passed through the hamlet of Pile of Bones by train, she named the new community Regina which is Latin for queen, after her mother, the Queen. This gave rise to frequent use of the Queen City when referring to Regina.
Source: Regina.ca, Wikipedia